|SUNW Loss Narrows in Quarter|
Thursday January 15, 8:04 pm ET
By Duncan Martell
SAN FRANCISCO (Reuters) - Network computer maker Sun Microsystems Inc. (NasdaqNM:SUNW - News) on Thursday posted a narrower quarterly loss on revenue at the high end of cautious Wall Street forecasts, reflecting stronger demand for computer services.
Analysts said it was too early to tell if the December-ended quarter marked the start of a sustainable recovery for Sun, which has been hit harder than its rivals in the technology slump and has suffered falling sales for almost three years.
Santa Clara, California-based Sun, which also said it was laying off 300 workers at a California plant, did not provide a financial outlook for coming quarters.
Sun shares initially rose in after-hours trade following the release of earnings, then eased again.
For its fiscal second quarter, Sun posted a net loss of $125 million, or 4 cents per share, compared with a year-earlier loss of $2.28 billion, or 72 cents per share, which included $2.13 billion to write down goodwill and other items.
Revenue slipped to $2.89 billion from $2.92 billion, but topped the average Wall Street forecast by 5 percent and was up almost rose 14 percent from the prior quarter.
That was highest growth from the first quarter to the second since 1998, Sun said.
"There were high expectations of recovery here and they delivered on them," said Brent Bracelin, an analyst with Pacific Crest Securities
Sun, which rode the dot-com and telecom booms to heady profits, has been squeezed on the high end by rivals International Business Machines Corp. (NYSE:IBM - News) and Hewlett-Packard Co. (NYSE:HPQ - News) and Dell Inc. on the low end.
As in recent quarters, Sun's Chairman and Chief Executive Scott McNealy and Chief Financial Officer Steve McGowan declined to provide financial guidance on a conference call with analysts.
A rise in services revenue in the quarter, to $944 million from $902 million a year earlier, failed to offset declining product revenue, which fell slightly to $1.94 billion from $2.01 billion.
Excluding a restructuring charge, Sun posted a loss of 3 cents per share compared with a profit of nil per share after a gain in the prior-year period.
Analysts, on average, had expected Sun to post a loss of 5 cents per share on that basis within a range of a loss of 3 cents to 7 cents, on revenue of $2.75 billion, according to Reuters Research, a unit of Reuters Group Plc.
McGowan said that government sales were strong and there was renewed strength in the long-beleaguered telecommunications market, which is a key market for Sun.
He also said that there was a more balanced mix in sales of high-end, mid-range and low-end servers than in recent quarters.
Revenue in Europe increased 19 percent from the prior quarter, even with year-ago levels, helped in part by a strong euro, while U.S. revenue climbed 4 percent sequentially and fell 4 percent from a year earlier.
"We feel good about where we're headed," McNealy said on the conference call.
Shares of Sun fell 10 cents, or 1.8 percent, to $5.36 in regular Nasdaq trade on Thursday. After the close, the stock initially rose to $5.44, then settled back to $5.35.
Earlier on Thursday, rival IBM reported higher quarterly profit and revenue, including an 18 percent gain in computer server revenue from a year ago.
"This is not an IBM where they're now growing server revenue north of 18 percent year over year," Bracelin said. "This is a recovery and Sun has been a laggard."
Separately, Sun said it was laying off 300 workers at its Northern California manufacturing plant, and will move those operations to plants in Oregon and Scotland. Sun has about 35,000 employees worldwide.
The transition in manufacturing will take about six months, a spokeswoman said, and employees to be laid off will be notified by the end of January.