Strong server sales lift Sun to profitable Q1

Fourth consecutive profitable quarter after several years of financial loss

Sun Microsystems reported net income of US$89 million on strong hardware sales for its first quarter of fiscal 2008, with the company posting its fourth consecutive profitable quarter after several years of financial loss and instability.

Total revenue for the first quarter, which ended Sept. 30, was $3.22 billion, an increase of about 1 percent compared with the $3.19 billion in revenue reported for the same period last year, when the company reported a net loss of $56 million.

The quarter was profitable even with a restructuring charge of $113 million, or $0.03 per share; however, the company slightly missed analysts' estimates for revenue. Analysts polled by Thomson Financial expected the company to report $3.27 billion in revenue for the first quarter.

Once thought to be in danger of being acquired or losing its position as a thought leader in the technology industry, Sun's been making a slow but apparently steady comeback since CEO Jonathan Schwartz took over as CEO from Chairman Scott McNealy a little more than 18 months ago.

In the past two years, the company has let go of some of the proprietary strategies that were keeping it down, open-sourcing both its Solaris operating system and Java development technology and embracing industry-standard processors from Intel and Advanced Micro Devices in favor of its own chips for its hardware products. The company also began selling software on a subscription basis, a move that gave a boost to its flagging Java-based software business.

Schwartz also enacted changes to make Sun more operationally efficient, as the high cost of operations was cited as a reason the company failed to turn a profit for several years. Sun cut about 4000 employees in the past year and also instituted some internal policies to cut costs.

As a result of these changes, Sun's server business is on an upswing, and the company is also reporting greater adoption of Solaris, which took a major hit several years ago due to pressure from Linux. Sun's software subscriptions also are contributing to its overall profits; according to a press statement issued Monday, Sun's identity management software made a particularly strong showing in the quarter.

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