Software // Enterprise Applications
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1/24/2008
07:30 PM
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Sun Revenues Barely Budge, But Profits Double

Among the highlights of the quarter was double-digit growth in emerging markets, including India, China, Latin America, Eastern Europe, the Middle East, and Africa.

Sun Microsystems on Thursday reported a near doubling of profits in its fiscal second quarter on only a slight increase in revenues.

The computer and software maker, which appears to be recovering from the money-losing years that followed the dot-com bust early in the decade, said net income for the quarter that ended Dec. 30 was $260 million, or 31 cents per share, compared with a profit of $133 million, or 15 cents a share, for the same period a year ago. The latest figure included $32 million the company spent in restructuring charges in the last three months.

The company generated $336 million in cash from operations, ending the fiscal second quarter with $4.68 billion in cash and marketable debt securities. Sun's gross margin, which is equal to gross income divided by net sales, rose 3.5 percentage points from a year ago to 48.5%. Gross margin is a good indication of how profitable a company is at its most fundamental level.

Sun's strong performance in net income, however, appeared to come from being able to squeeze more profit out of almost the same amount of revenue as a year ago. Revenue for the fiscal second quarter rose 1.4% to $3.62 billion, compared with $3.57 billion a year ago.

Since taking office in 2006, Sun chief executive Jonathan Schwartz has cut jobs and other expenses, introduced new products, and signed new partnerships. Among the latest deals was one in which Dell agreed to sell servers with Sun's Solaris operating system.

Among the highlights of the quarter was double-digit growth in emerging markets, including India, China, Latin America, Eastern Europe, the Middle East, and Africa, Schwartz said in a statement. "Today's results clearly demonstrate steady progress against our financial targets and highlight the accelerating demand set to fuel growth in the back half of the fiscal year."

Sun, which generates most of its sales from servers and storage, said last week it was acquiring Swedish company MySQL AB for $1 billion in cash and stock. MySQL, a pioneer in open source database systems, was expected to plug a hole in Sun's software product line and move the company toward becoming a supplier to Web 2.0 companies.

MySQL's namesake technology represents only a small portion of the world's $15 billion in database sales. However, the database is most often used for new Web applications, particularly those for the social networking, active user-input types of sites, such as Facebook and MySpace.

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