Cost of redundancies and the Kodak Java dispute weigh down Sun

By Matt Whipp

Posted on 15 Oct 2004 at 14:27

Sun Microsystems pulled ahead of analyst expectations in its latest quarterly results, but overall revenues were shy of targets.

Analysts had predicted revenues to average $2.71bn for the quarter ending 26 September, but Sun pulled up short of that to the tune of $2.628bn. However, this still represents growth of around 3 per cent, the second quarter to continue that trend.

In all, Sun showed a narrower net loss of $174mn or $0.05 per share, compared with a net loss of $286mn or $0.09 per share a year ago. This was despite heavy restructuring charges as the company struggles to return to profitability, including its plan for 3,500 redundancies this year. The recent patent dispute with Kodak also added $82mn to the deficit.

'The first fiscal quarter is usually our toughest but the management team executed well operationally,' said Scott McNealy, chairman and CEO, Sun Microsystems. 'Following a solid June quarter, we now have two quarters in a row of year over year revenue growth. And we are on the offense again as a result of our newly revamped product line, a result of our sometimes controversial but continued commitment to R&D investments in the last three years.'

In contrast, Steve McGowan, Sun's CFO and executive VP, corporate resources, championed cutbacks to R&D: 'We're very pleased with fiscal Q1 results. We grew revenue year-over-year for the second consecutive quarter, increased our gross margin percentage sequentially, lowered combined R&D and SG&A spending by over $260 million sequentially,' he said.

Sun finished the quarter with $7.433bn in cash and marketable debt securities. Stock closed down from $4.02 to $3.97 on Wall Street yesterday.