Sun Emerges From Cloudy 2004

Things are looking up at Sun Microsystems Inc. (Nasdaq: SUNW), with its first-quarter results boosted by sales of enterprise servers, but the company is still wrestling with its long-term restructuring plan (see Sun Posts Q1 Results).

Last night the Santa Clara, Calif.-based firm posted revenues of $2.6 billion, up nearly 4 percent on the same period last year. Sun also managed to beat analyst expectations by reporting a net income of $13 million, breaking even on a per-share basis, compared to a loss of $259 million, or 8 cents per share, a year ago. Analysts had expected Sun to report a net loss of 3 cents per share.

Speaking on a conference call last night, Sun CFO Steve McGowan explained that product revenue was driven primarily by four- to 24-way enterprise servers. Sales of servers built using the X-86 architecture rose some 36 percent year-over-year, and the company's 12-way servers have also been performing well, he said.

But the hardware giant is still overhauling its business following a difficult spell. Sun's financial outlook was much bleaker earlier this year, as it felt the heat from rival hardware and software vendors such as IBM Corp. As a result, the vendor announced plans to reduce its head count by 3,300 (see Is Sun Setting?).

Last night McGowan confirmed that some 2,900 employees have already left the company. Now he says another 600 workers will join them, bringing the total employee cull to 3,500.Since first announcing the job cuts in April, Sun has worked hard to streamline its business, improve its routes to market, and edge back towards profitability (see Sun Reorgs Under New COO and Sun Shines With Q4 Profit).

But communication and effective marketing will prove key: The company has often been criticized for failing to promote a coherent message about its technology. Last night, Sun execs sought to address this by highlighting the company's product roadmap, citing new operating systems and pricing models (see Sun Unlocks Grid for $1).

Sun CEO and hockey nut Scott McNealy was bullish about the coming year. "Starting now, we're going on offense big-time," he said, spitting out his coach's whistle.

The next big announcement is the eagerly-awaited Solaris 10 operating system, which is slated for next month. In particular, McNealy talked up Solaris 10's Linux bias. "It will be the only enterprise [version of] Unix left to run Linux binaries with no modifications in containers in native," he said. "It's pretty exciting." [Ed. note: OMG, it sure is!]

And, of course, the combative McNealy seldom misses an opportunity to trash-talk the opposition: "[We're] shipping our UltraSPARC 4 multi-threaded... servers with two times the throughput of our previous systems and kicking some major butt on HP and IBM machines out there," he said.The market responded positively to Sun's results. In early trading today, Sun shares rose 6 cents to $4.03.

James Rogers, Site Editor, Next-gen Data Center Forum