Revenue Growth, MS Settlement Boost Suns Q4

The company's $2 billion settlement with Microsoft, along with increased demand across most product lines, brought Sun its first revenue gain in about three years.

Sun Microsystems Inc. saw revenue and income jump in the fourth quarter, fueled in large part by its $2 billion settlement with rival Microsoft Corp.

The Santa Clara, Calif., company announced Tuesday that it earned $795 million on $3.11 billion in revenue, compared with a loss of almost $1.04 billion on $2.98 billion in revenue for the same period last year. The revenue increase was the first in about three years, the company said.

The April agreement between the two companies, which settled the various antitrust suits brought by Sun against Microsoft, called for Microsoft to pay Sun $2 billion. Without the settlement, Sun would have lost money during the quarter ended June 30, according to the company.

/zimages/1/28571.gifClick here for a column on how the deal will affect enterprises.

During a conference call with analysts and journalists, Sun officials said demand across most product lines increased, including servers, where the company saw unit shipments jump 46 percent over the fourth quarter 2003 and 18 percent over the last quarter.

Unit shipments of its fledgling x86 servers—primarily the Sun Fire V20z system based on Advanced Micro Devices Inc.s 64-bit Opteron processor—grew 115 percent over the previous quarter.

In addition, Suns services business generated more than $1 billion in revenue for the first time, and the companys Software Express program for the Solaris operating system saw a 77 percent jump, with x86 downloads representing 68 percent of the increase.

Chairman and CEO Scott McNealy and Jonathan Schwartz, president and chief operating officer, said the growth in the companys product line indicates that Sun is making headway in re-establishing itself in the data center.

Suns offering of Solaris on both the x86 systems and its own SPARC-based servers gave businesses a clearer operating-system picture than did IBM with its Power Architecture, and Hewlett-Packard Co., which is phasing out its PA-RISC processor line in favor of Intel Corp.s Itanium chip.

/zimages/1/28571.gifRead more here about Suns delivery of the Solaris 9 x86 Platform Edition.

The offering also enabled Sun to make inroads into the x86 market, they said.

"SPARC and Solaris server revenues were up, and x86 [server revenues] were up, so I would say were starting to chew into … the x86 industry," McNealy said. "Weve got a clearer story for our customer base [than IBM]. … I think the real hurting cowboy here is HP."

Sun is taking two different tacks in its server strategy. In the high-end Unix space, the company has partnered with Fujitsu Ltd. to combine development efforts on the SPARC/Solaris platform, which will result in a new family of servers starting in 2006 called the Advanced Product Line.

At the same time, Sun is riding AMDs Opteron chip as it tries to gain traction in the x86 world. Earlier this year, the company released the two-way V20z; it soon will roll out two workstations based on Opteron and is working on a four-way and an eight-way system. While the systems can run Linux and Microsofts Windows operating systems, customers ordering Solaris on the x86 systems can see deep discounts, a tool Sun is using to drive its operating system.

Schwartz said there is an opportunity to increase Solaris use with the upcoming release of Solaris 10 and the consolidation of the Linux market around Red Hat Inc.s offering. Schwartz also said Sun is looking into enhancing Solaris to enable it to run on Itanium and Power systems, though he added that no decision has been made.

In addition, Sun saw the number of subscribers to its Java Enterprise Systems software stack jump by 74 percent, the company said.

Looking forward, McNealy said Suns goal is to reach sustained profitability in fiscal year 2005.

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