Sun Microsystems reported fourth quarter financial results slightly
above expectations yesterday, although it posted a loss in
operating profits.
Pro forma net income, excluding one-time charges such as
acquisitions, was $134m (£93.83m), down from $717m in the same
period last year. Fourth quarter pro forma earnings per share came
in at $0.04, compared to $0.21 last year. The earnings per share
figure beat a Thomson Financial/First Call survey of analysts by a
penny, although the analysts had lowered their estimates earlier in
the quarter.
Including one-time charges, the company posted a loss of $0.03 for
the quarter. In addition, the company reported a $179m loss in
operating income for the quarter ended 30 June.
"We have taken a haircut in earnings, but we are protecting what
matters, and that is the long term assets," Scott McNealy, Sun's
chairman and chief executive officer, said in a conference call.
The company is guarding its future by increasing its spending on
research and development (R&D) through the tough economic
period, he said. The company increased its R&D spending by 17%
in the quarter compared to a year ago, McNealy said.
The company reported fourth-quarter revenue of $4bn, compared to
$5.02bn in the year-earlier period. The fourth-quarter revenue beat
a Thomson Financial/First Call survey of analysts who predicted
revenue of $3.9bn.
For the full year, Sun reported fiscal year 2001 revenue of
$18.25bn, up from $15.72bn the previous year. Pro forma earnings
per share for the year came in at $0.42, down from last year's
$0.55. Including one-time charges, earnings per share for the year
was $0.27.
Sun released its results after the markets closed yesterday. The
company's stock (SUNW) ended the day up 3.22%, at $14.44.
Sun offered little guidance for the months ahead, claiming market
conditions made it hard to make accurate predictions.
The company has suffered from an industry-wide clampdown on
technology spending. It has seen hardware revenue drop
significantly, as the slowing expansion of Internet infrastructure
has caused server demand to fall.
The company issued a warning for its fourth quarter in May, saying
it had been hit by a slowing US economy and, in particular, from
reduced spending by Internet companies and service providers.
Earlier this month, Sun employees were asked to take a week off as
one of several cost-cutting measures. Sun, however, is somewhat
rare among its peers, avoiding layoffs thus far. Other hardware
titans such as Dell, Hewlett-Packard and Compaq have all announced
layoffs this year.
A deteriorating European economy affected Sun more than it had
expected as the fourth quarter progressed, the company said
yesterday. While parts of South East Asia remain strong, the
company fears that Asia as a whole could be hit by the same
slowdown that has hit technology spending in the US and Europe. The
company has hopes for the Latin America market, however, and Brazil
in particular.
Sun officials highlighted several parts of the business that they
said performed well, including its services division, which enjoyed
a 30% increase in revenue year over year, and an 8% hike
sequentially. The company also said its iPlanet Internet software
sold well, along with storage products.
The company used its growth in services as an excuse to badmouth
rival IBM's services division.
"If you have a wallet, they have a Hoover," said Ed Zander,
president and chief operating officer at Sun, speaking about IBM's
Global Services group. "They will stay on the project until you run
out of money or until they solve the problem, whichever comes
first."
Earlier this week, fellow Sun rival Microsoft dropped its support
of Sun's Java programming language in the upcoming release of
Windows XP. The two companies had engaged in a bitter court dispute
over the technology. While Java development has surged in recent
years, its adoption could slow somewhat from the lack of Windows
support, according to some observers.
McNealy said he expects computer makers to start bundling Java
technology on their PCs of their own accord. Sun will make some
announcements in the near future related to Java Virtual Machines
(JVMs) for Windows, he said. A JVM allows a program written in Java
to run on virtually any computing device regardless of its
operating system, and is the Java technology Microsoft said it
would drop from Windows XP.
"This is just classic Microsoft," McNealy said of that decision.
"It is kind of funny to watch."