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The server and software company posted net income of US$67 million
for the quarter ended April 1, a significant improvement over the
US$217 million loss a year earlier. Revenue increased 3 percent to
US$3.28 billion, but that was a notch less than the expectations of Sun
itself and of analysts surveyed by Thomson First Call, who predicted
US$3.42 billion.
"As we hinted (in the previous quarter), we expected the quarter
would be challenging, and in fact it was," Schwartz said in a
conference call. The company blamed the problem on customers holding
back purchases until the release of Sun's new M-class servers jointly
developed with Fujitsu.
Sun Microsystems posted its second consecutive quarter of profit on
Tuesday, but revenue was hurt by a slowdown in server sales in the
final weeks of Jonathan Schwartz's first year as chief executive.
The server and software company posted net income of US$67 million
for the quarter ended April 1, a significant improvement over the
US$217 million loss a year earlier. Revenue increased 3 percent to
US$3.28 billion, but that was a notch less than the expectations of Sun
itself and of analysts surveyed by Thomson First Call, who predicted
US$3.42 billion.
"As we hinted (in the previous quarter), we expected the quarter
would be challenging, and in fact it was," Schwartz said in a
conference call. The company blamed the problem on customers holding
back purchases until the release of Sun's new M-class servers jointly
developed with Fujitsu.
"We
ended up a couple percentage points short of our plan," principally
because of weakness in server and storage system sales in the last few
weeks of the quarter, said Chief Financial Officer Mike Lehman. "It
appears part of that was (customer) anticipation of higher-performance
products announced by Sun and Fujitsu. It appears not that we're losing
business to competitors."
Sun is maintaining its goal of 4 percent operating margin--a measure
of financial health consisting of operating profits as a percentage of
revenue--for the current quarter, which runs through June. Strong performance
at the end of 2006 has helped boost the company's stock price, though
it dropped 35 cents, or 6 percent, to US$5.59 in after-hours trading
Tuesday.
Sun has had some success boosting services revenue in recent years,
but its software and storage system sales haven't shown much progress.
Its recent financial improvements have come in its bread-and-butter
business: selling servers.
Schwartz took over as Sun CEO a year ago,
rising through the ranks from the software side of the Santa Clara,
Calif.-based company's business with a two-year stint as chief
operating officer.
He's brought some of his software ways to Sun's hardware business,
said Redmonk analyst Stephen O'Grady, pointing to Sun's try-and-buy
program that lets customers try Sun severs free for 60 days and its open-source UltraSparc T1 "Niagara" chip design called OpenSparc.
And during Schwartz has clarified Sun's market stance, fully embracing
open-source software and servers using x86 processors. "The comment I
heard from a sizeable (Sun customer) is, 'At least I know what the plan
is. You know they're going open, you know they're committed to x86,"
O'Grady said.
In its most recent quarter, Sun's Niagara system sales were over
US$125 million, about the same as in earlier quarters, the company
said. "We want to see that growing as we go forward," Schwartz said.
There are plenty of new Sun hardware options on the horizon.
Newly arriving are Sun's M-class systems,
which employ Sparc64 VI processors and high-reliability mainframe
technology from Fujitsu and Sun's Solaris operating system. They
largely replace Sun's own servers with its UltraSparc IV+ processor,
which has done unexpectedly well in recent quarters.
Also in June, Sun will release its "Constellation" blade server,
which will accommodate blade servers with Niagara processors as well as
x86 chips from Advanced Micro Devices and Intel, Schwartz said. It's
one of several Intel-based servers the company is introducing alongside its existing AMD systems.
Sun also wants to sell servers not just a rack or blade server chassis
at a time, but a data center at a time. To expedite the process, it's
begun what it calls Project Blackbox
to sell entire shipping containers full of servers ready to operate.
The company sold its first model, Schwartz said, to the Stanford Linear
Acclerator, which will use its Blackbox for high-performance computing
Next, Schwartz said, will come Niagara 2 in the third quarter of
2007--the first quarter of Sun's fiscal 2008. And its new "Rock" chip,
a high-end 16-core cousin to the eight-core Niagara and Niagara 2, will
arrive in the second half of 2008.
Read the original article: http://www.zdnetasia.com/news/business/0,39044229,62008164,00.htm
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