Sun reported a net profit in its quarterly income of USD$19 million, or 1 cent per share, for its second quarter of its fiscal year 2005 that ended December 26, 2004. In comparison, last year during this time Sun had a loss of USD$125 million, or 4 cents per share.

Sun earnings for this quarter include a charge of USD$24 million from work force and real-estate restructuring, as well as gains of USD$9 million on equity investments and USD$6 million from related tax adjustments.

"The second quarter delivered many positives, including x64 and x86 server unit volume growth, positive cash flow from operations, and stunning market reviews of SolarisTM 10 OS. It feels good to ring up a modest GAAP profit," said Scott McNealy, chairman and chief executive officer, Sun.

Excluding these amounts, Sun reported that its adjusted profit would have been USD$28 million, or 1 cent per share, this quarter on a non-GAAP basis. This also demonstrated improvement from last year's non-GAAP results, which reported a net loss of USD$99 million, or a 3 cents per share net loss.

Sun's revenues for this period were USD$2.843 billion, a decrease of 1.6 percent from USD$2.888 billion a year earlier. However, the company reported its gross margin rose 0.5 percent when compared to the same period last year, to 42.3 percent of its revenues.

Cash generated from operating activities accounted for USD$52 million during this quarter, and the cash and marketable debt securities balance increased to USD$7.464 billion.

For the last two previous quarters that ended in June and September 2004, Sun's revenues grew, a positive sign for the company that had experienced three years of declines.

"We believe that evidence for Sun's turnaround began to surface in the December 2003 quarter and this evidence has steadily gotten stronger ever since," noted Caris & Co. analyst Mark Stahlman in an Associated Press news release. "Progress on products, customer acceptance, internal restructuring and morale has been steady."

Steve McGowan, chief financial officer and executive vice president, Corporate Resources at Sun commented, "We're pleased with our progress this quarter toward achieving our key financial goals. On a year-over-year basis, we increased our gross margin percentage, improved productivity by reducing R&D and SG&A expenses by USD$136 million and continued to generate positive cash flow from operations. This was all accomplished without compromising our product road maps."

McNealy commented on these company product road maps stating, "Sun has one of its most rock solid product line-ups in history today. Innovation is increasingly marked by business models as much as technology. Sun's USD$1 per CPU/hour and the Sun JavaTM Enterprise System are emerging models for recurring revenue. We are clearly reestablishing relevance in key markets." [...read more...]

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