Improving Cost Structure

By Mark Hachman  |  Posted 2004-04-15 Print this article Print

In terms of products, chief executive Scott McNealy on Thursday said the companys portfolio is "stronger now than in the past 10 years." "We feel very good about it, and now is the time to go address [our] cost structure," he said. The company wants to improve the efficiency of its supply chain in a bid to return to profitability, he said in a conference call.
McNealy, Schwartz and other executives did not discuss the restructuring during the call, leaving it to analyst Laura Conigliaro of The Goldman Sachs Group Inc. to ask about the shift. Schwartz said Sun is operating with "eyes wide open" to find the best executives to lead the new business units, adding that the best executives for the job would be found within Sun.
"Very, very few people have a new boss, and thats what really drives a disruption," McNealy said. In terms of the individual business units, server unit volumes grew 22 percent year-over-year. Sun shipped 193,901 CPUs during the fourth calendar quarter of 2003, according to IDC. Product revenues dipped slightly as a percentage of overall revenue to 65 percent, or $1.71 billion; services revenues made up the remainder, or $940 million. The UltraSPARC IV chip did not ship until week 13 of the quarter and therefore had a reduced impact on product revenues, said Steve McGowan, the companys chief financial officer. McNealy also said that Sun would begin to "tape out" a 32-thread microprocessor in 60 to 90 days. Sun spokeswoman Sabrina Guttman said McNealys comments referred to the "Rock" processor that Sun is pinning its hopes on after terminating the "Millennium" and "Gemini" projects. Sales of computer-related products dipped 13 percent to $1.36 billion, while the attach rate for Suns remaining storage products grew to 25.3 percent, the company said. Click here to read about Suns revamping of its enterprise server lineup. In software, Sun added 81,400 subscribers for a total of 174,000 to its Java Enterprise System program, which offers companies licensing fees of $100 per employee per year. According to McNealy, customers regard this as "a steal," although Sun requires them to also buy associated Sun hardware and services. Solaris 9 downloads reached just under 25,000 in the fiscal third quarter, he said. Next Page: McNealy touts interoperability of Microsoft deal.


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