Sun on target for higher revenue

Sun Microsystems offered a glimpse into its finances for the current quarter yesterday, predicting that it would meet revenue...

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Sun Microsystems offered a glimpse into its finances for the current quarter yesterday, predicting that it would meet revenue estimates despite a challenging market for sales of its server hardware.

"Based on our current view, we expect a seasonal sequential upturn in revenue," said Steve McGowan, chief financial officer and executive vice-president of corporate resources at Sun.

Sun reported revenue of $2.7bn (£1.75bn) for its first quarter. For the second quarter, ending 31 December, analysts expect the company to report about $2.9bn in revenue.

McGowan said that Sun's actual revenue would be "in line with the current consensus figure".

Operating expenses should see a "modest sequential increase" from the first quarter, due primarily to investments in research and development and money spent on acquisitions, McGowan said.

In the past three months, Sun has announced the acquisitions of Pirus Networks and Terraspring, both of which are intended to boost its offerings around storage and network management.

Sun is close to completing its latest round of layoffs, which is expected to cut 4,400 employees from its work force. "We are substantially complete in the US. We expect the majority of international reductions to conclude by the end of the third quarter," McGowan said.

In a research note issued last week, investment bank Sanford C. Bernstein said that weak demand for Sun's hardware products, particularly in Europe and Canada, did not bode well for Sun's second-quarter revenue.

"In short, we see no upside to revenue expectations coming out of the mid-quarter call, and some possible downside," wrote analyst Toni Sacconaghi.

Sacconaghi also questioned the success of Sun's entry into the low-end Linux server business. In August, the company unveiled the LX50, an Intel-based server that runs a version of the open source operating system from Sun. The research firm estimated that Sun sells less than 500 LX50 servers each month.

"We continue to believe that Sun's Linux offering will not have a material impact on the company for at least the next year," Sacconaghi wrote.

Sun would not comment on the success of individual products or regions. "It's a very competitive environment. I don't want to single out any products or time zones," McGowan said. "Our sales force is aggressively going out and winning business."



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