Sun posts smaller-than-expected loss

By Matthew Fordahl The Associated Press
Saturday January 19, 2002

SAN JOSE — Server giant Sun Microsystems Inc. on Friday announced a smaller-than-expected second-quarter loss and some success as it expands its customer base beyond dot-coms and telecommunications companies. 

The company said it has recently made sales in health care, life sciences, education, government and retail — areas where it has always played, but not to the extent of telecoms and dot-coms in the past. 

“Obviously, no business wants to be horribly dependent on one major segment no matter who it is, so broader is better,” said Michael Lehman, Sun’s chief financial officer. 

For the three months ended Dec. 30, Sun lost $431 million, or 13 cents per share, on revenue of $3.1 billion. That compares with profits of $423 million, or 15 cents a share, on sales of $5.1 billion last year. 

Excluding special items, the company lost $99 million, or 3 cents a share, compared with a profit of $494 million, or 13 cents a share, in the same period last year, the company said Friday. 

Analysts were expecting a loss of 4 cents a share on sales of $3.1 billion, according to a survey by Thomson Financial/First Call. 

In trading on the Nasdaq Stock Market, Sun shares were down 20 cents at $12.17. 

“We are showing signs of progress,” Lehman said. “Despite economic uncertainties, Sun still is investing in product development and core competencies to promote the long-term growth of the company.” 

In December, the company said it was likely to hit its financial targets for the quarter but stopped short of offering any specific guidance. 

After strong growth during the high-tech boom, Sun was hit hard as large companies reduced spending and dot-coms shut down. In October, Sun said it was laying off 3,900 employees, or 9 percent of its work force. 

On Friday, Sun said it made gains in industries that were behind much of its growth before the downturn. 

“We’re winning more business and getting more design wins than we have in a long time,” said Scott McNealy, Sun’s chief executive. 

Among recent customer wins are the American Hospital Association, De Novo Pharmaceuticals, the University of Southern California, the Census Bureau and the grocery chain Smart and Final. 

“We’re obviously seeing the benefits, but this is not something where you’re going to see big chunks of business,” said Richard Chu, an analyst at SG Cowen Securities. “It’s building brick by brick into classic enterprise businesses.” 

Lehman said the company expects third-quarter revenues to be slightly above the $3.1 billion of the second quarter. Analysts are expecting third-quarter revenues of $3.2 billion. 

Sun executives said the company is on track to return to profitability by its fiscal fourth quarter, which ends in June. 

For the first half of its fiscal year, Sun lost $611 million, or 19 cents a share, versus a profit of $879 million, or 26 cents a share, a year ago. Revenue fell to $5.97 billion from $10.17 billion. 


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Sun Microsystems: http://www.sun.com