Sun swings to black in fourth quarter

Sun Microsystems has swung to a fourth quarter profit compared to a loss last year on essentially flat revenues.

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Sun Microsystems has swung to a fourth quarter profit compared to a loss last year on essentially flat revenues.

Sun posted net income of US$329m (£162m), or $0.09 a share, on revenue of $3.835bn (£1.886bn) in the three months to June 30, reversing a loss of $301m (£148m), or $0.09 a share, on revenue of $3.828bn (£1.883bn) in the same quarter in 2006.

The company credited cost-cutting for part of its swing to profitability. It also benefitted from lower component costs, such as for computer memory, said Mike Lehman, Sun's chief financial officer.

Sales revenue for Sun servers dropped 15% in the fourth quarter from a year earlier, while sales of Sun's x64 servers, in particular, declined 4%. Overall revenue fell 2%b in the US and was flat in the rest of North America and South America. It was up 2% in other global markets.

Virtualisation may have held down server sales. Virtualisation technology helps companies better utilise their servers, reducing the need to buy as many as before. But customers who are buying new servers today are buying more high-end servers, an advantage for Sun, CEO Jonathan Schwartz said on the conference call.

"They're buying more richly configured systems. That plays to our strengths," Schwartz said, citing strong sales of its SunFire T1000 and T2000 servers, Netra UltraSparc blade servers and the X4500 combination server and storage device.

Using its operating margin as a measure of its success at cutting costs, Sun set a goal for itself after its last earnings report for the quarter ended March 30. The company aims to reach a 10% operating margin by its 2009 fiscal year, which begins next July.

Sun makes servers and storage hardware and developed the Solaris 10 operating system.

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