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Sun posts $174m loss in Q1

Sun Microsystems has posted a net loss of $174m (£97m) for the first quarter of its fiscal 2005 year, which ended 26 September.

This included a $190m in charges on its balance sheet related to restructuring and its recent patent lawsuit settlement with Eastman Kodak.

In the same period last year, Sun reported a loss of $286m.

Excluding the restructuring and Kodak settlement charges as well as a $4m investment loss, Sun's net income for the quarter would have been $13m on a non-GAAP (generally accepted accounting principles) basis, making it the company's second profitable quarter in a row after a string of losses.

"We've had two in a row, back to back," said Sun's chief financial officer Stephen McGowan.

Sun reported income of $795m last quarter, a number that was buoyed by the nearly $2bn it received as part of its legal settlement with Microsoft. Discounting the Microsoft money, Sun reported a net loss of $169m during that quarter.

Total first-quarter revenues for the computer-maker were $2.63bn, up 3.6% from its year-ago total of $2.54bn, but lower than the $2.712bn analysts had been expecting, according to Thomson First Call.

Revenues from sales in the US and Japan were down 5% and 1%, respectively, from last year's totals. However, Sun reported an increase of 18% from last year's European revenues, which were helped by sales like the recent 5,000 licence Java Desktop System deployment with the UK's National Health Service.

Sales to Hewlett-Packard customers looking to move from hardware built by the former Digital Equipment also contributed to Sun's performance in Europe, said chairman and chief executive officer Scott McNealy. "There's clearly a lot of Digital Equipment installed base that we're taking advantage of there."

Over the past year, Sun has gradually expanded an "HP Away" programme designed at enticing users of HP's legacy platforms, including the Alpha systems once sold by Digital Equipment.

Sun sees HP's transition to systems based on Intel's Itanium microprocessor as a potential opportunity.  "We're definitely seeing a weakening in HP's installed base as they realise that they've got a roadmap transition to fund, because they've got to get off a dead microprocessor," said Jonathan Schwartz, Sun's president and chief operating officer.

Sun has now handed layoff notices to 3,500 employees since it announced job cuts in April, 200 more positions than it had originally expected to reduce. At present, 2,900 of those staff have left the company, and the remaining 600 employees were notified of their layoffs during the most recent quarter, McGowan said.

Robert McMillan writes for IDG News Service


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