Suns Earnings, Revenue Take a Hit

The company announces its fourth-quarter earnings and revenue declined over the same period last year, and it lost more than $2.3 billion during its entire fiscal year.

Sun Microsystems Inc. saw its fourth-quarter earnings and revenue decline over the same period last year, and the company lost more than $2.3 billion during its entire fiscal year.

Numbers released on Tuesday showed the Santa Clara, Calif., company earned $12 million and generated almost $3 billion in revenue in the three months ended June 30.

The $12 million in net income fell short of the $61 million Sun earned during the same period last year, and the $3 billion in revenue was a 13 percent decline over the $3.4 billion it generated last year.

For the year, the server and workstation makers $2.3 billion loss dwarfed the $587 million it lost in fiscal year 2002. Full-year revenues of $11.4 billion represented an 8.5 percent drop from the $12.5 billion it generated during the last fiscal year.

According to the company, the $2.3 billion loss included a non-cash impairment expense of $2.1 billion.

Sun officials applauded the companys efforts to rein in expenses while continuing to invest as much as $2 billion in research and development.

"Weve made solid progress throughout the fiscal year, delivering on key initiatives such as NC03 [an effort to release major products on a quarterly basis], low-cost computing, N1 [data center virtualization initiative] and Project Orion [integrating Suns applications and infrastructure technologies into the Solaris operating system]," Scott McNealy, president, chairman and CEO, said in a prepared statement. "At the same time, weve driven internal costs down while continuing our investment in R&D. We enter the new fiscal year with an intense focus toward growing revenue, improving profitability and maintaining positive cash flow from operations."

In a conference call with analysts and reporters on Tuesday, Chief Financial Officer Steve McGowan said much of Suns focus for the upcoming year will be on increasing revenue and that products—particularly servers—will be the key to that.

"[Returning to profitability] is our No. 1 priority and focus in terms of financials, and products will do it for us," McGowan said.

However, the company took a blow when it delayed the shipping of the low-end Sun Fire V210 and V240 systems, which were scheduled to ship by the end of the quarter.

"We found through final testing ... a component we wanted to get straightened away," he said, adding that the systems will ship "shortly." McGowan said the $50 million in delayed billing for the systems would not have changed Suns financial picture too much, although it would have been a help.

In addition, McGowen said that Sun is working to increase its share in the highly competitive 32-bit computing space. Admitting that Sun was late getting into the spac—mistakenly believing that businesses would more quickly migrate to 64-bit computing, where Sun has its UltraSPARC-based systems—McGowan said that recent releases of lower-end servers powered by Intel Corp. and Advanced Micro Devices Inc. chips indicate the companys intent to become a larger player there.

Like rivals Hewlett-Packard Co. and IBM, Sun is focusing a large part of its attention on low-end systems as the scale-out approach to data center infrastructure gains a foothold. In May, Sun and Oracle Corp. strengthened their 20-year-old alliance in a move that officials said will result in lowering the costs of deploying their software and systems.

In support of a more distributed computing model, Sun rolled out the Sun Fire V60x and V65x, one- and two-way systems that can run either Linux or Suns Solaris x86 Platform Edition.