Sun Fights for High-End Market Share

HP and IBM grab more market share and once-mighty Sun is feeling pressure in the high-end market it took for granted.

The news from Sun Microsystems' quarterly financial report was not reassuring.

After talking about restructuring the company for more than a year to better compete in the marketplace, Sun CEO Jonathan Schwartz announced a $34 million net loss or 4 cents per share in the fiscal third quarter, compared with a net income of $67 million or 7 cents per share profit in 2007.

Those results could lead to Sun cutting up to 2,500 positions as it looks to refocus its energies.

One source of this sudden downturn in the company's fortunes seems to be the company's high-end systems business. When the results came rushing in May 1, several analysts noted that the company seemed to have lost ground in one of its most well-known product areas, specifically its high-end Unix server business with its line of systems based on SPARC processors.

In an analysis by Josh Farina of Technology Business Research, Sun shipped 4.6 percent fewer SPARC-based systems in the quarter compared to the same time last year, which made it the sixth straight quarterly decline for the company's high-end systems. At the same time, the company's shipments of x64 servers, machines based on processors from Advanced Micro Devices and Intel, increased by 26 percent.

Overall, Sun's server revenue dipped 1.8 percent in the quarter to $1.47 billion.

While Schwartz and Sun executives blamed the slowing economy in the United States for the company's current financial woes-about 35 percent of its sales are in the United States-Farina noted in his analysis that IBM turned a profit during the same time period.

"Overall, Sun reports that the uncertain U.S. economy led the company to post a year-to-year revenue decline in [the first quarter of 2008]," Farina wrote in an e-mail. "However, I'm hesitant to believe that the U.S. economy was the key factor, since IBM, which earns around the same percent of revenue from the U.S., at approximately 30 percent, posted 11.2 percent growth in [the first quarter 2008] and 6 percent growth in the U.S. Sun appears to be losing to its competition."