System News
Sun Reports Revenues Up 21% for Third Quarter Fiscal Year 2006
Acquisitions and Growth in Traditional Markets Cited for Increase
April 24, 2006,
Volume 98, Issue 4

Our investments in R&D during the past couple of years have resulted in a terrific product line.

-- Michael Lehman

Sun Microsystems Inc.'s fiscal third quarter that ended March 26, 2006, reported a 21 percent revenue increase with US$3.177 billion attributed to recent acquisitions and growth in traditional products compared to $2.627 billion in sales reported for the same period last year.

"Our investments in R&D during the past couple of years have resulted in a terrific product line. Combined with our recent acquisitions of StorageTek and SeeBeyond, as well as other technologies, we now offer a broader and more compelling portfolio of choices to our customers," said Michael Lehman, chief financial officer and executive vice president, Corporate Resources, Sun Microsystems. "We're pleased with the improvement in demand across numerous geographies; in particular, our growth in the U.S. market was broadly-based across both traditional and nascent industries. We delivered the results we were anticipating, including our operating expense guidance for the quarter."

The percent of revenues for the company's total gross margin for the reporting quarter widened to 43 percent, demonstrating 1.6 percent rise from the third quarter in fiscal 2005.

"We're growing again. Products are winning awards. The SolarisTM 10 Operating System (Solaris OS) is a runaway success. The next step is consistent profitability," said Sun Chairman Scott McNealy.

The company's net loss on a GAAP basis for the three month period was $217 million, or 6 cents a share, compared with $28 million, or 1 cent, for the third quarter of fiscal 2005.

In disclosing fiscal 2006's third quarter GAAP net loss, Sun assigned the results to the following:

  • $87 million principally related to intangible asset amortization associated with recent acquisitions
  • $57 million of stock-based compensation charges relating to the implementation of SFAS 123R
  • $36 million in restructuring charges
  • $4 million gain on equity investments
  • $4 million benefit for related tax effects

The net impact of these five items is approximately 5 cents per share.

Cash generated from operations for the third quarter was $197 million and cash and marketable debt securities balance at the end of the quarter was $4.429 billion.

Newly appointed Sun CEO and President Jonathan Schwartz summarized the reporting period, stating, "Each quarter we drive for measurable improvement in our products, customer acceptance, competitive position and operational execution. During Q3, we grew our traditional business year over year in the United States, most of Asia, parts of Europe and almost all parts of the International Americas. We're pleased with customer acceptance of our products in key markets such as telco, government, energy and retail, to name a few. We're well positioned in the marketplace, and expect to reach new and traditional customers with our open source, industry-leading Solaris 10 software stack and our recently improved systems products."

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