Sun Shares Jump on 4Q Profit

Shares of Sun Microsystems Inc. jumped more than 4 percent Tuesday, a day after the server and software maker posted its third profitable quarter in a row and showed it has made substantial progress from its long-lasting, brutal downturn.

Sun's shares rose 21 cents, or 4.3 percent, to $5.10 Tuesday.

Sun's fiscal fourth-quarter results were bolstered by lower expenses and increased adoption of its open-source operating system.

Sun earned $329 million, or 9 cents per share, for the quarter ended June 30. That compares with a loss of $301 million, or 9 cents per share, during the same period last year.

Revenue was $3.84 billion, a slight increase from the $3.83 billion in sales the Santa Clara-based company had in the same quarter last year.

Excluding stock-based compensation and other one-time charges, Sun's net income was still 9 cents per share, nearly doubling the average estimate of 5 cents per share from analysts polled by Thomson Financial. Revenue was in line with analyst estimates.

Sun has been aggressively cutting costs since Jonathan Schwartz took over as chief executive in April 2006 from co-founder Scott McNealy. The company chopped its operating expenses -- which includes research, development and administrative costs -- for the latest quarter by nearly 25 percent, to $1.49 billion.

Schwartz emphasized in an interview with The Associated Press that Sun has been boosting the profitability of its products at the same time, while benefiting from a shift in corporate data centers to virtualization, or software that allows companies to run multiple operating systems on individual servers.

Virtualization lowers overhead costs while improving the performance of the most power-hungry machines. Schwartz said the trend has led to Sun's higher server sales.

For the fiscal year 2007, Sun rang up $6.46 billion in sales in its computer systems products category -- the company's biggest source of revenue -- an 8 percent jump over last year.

Sun's total revenue for the full year was $8.77 billion, a 5 percent increase from $8.37 billion last year. Net income for the fiscal year was $473 million, compared with a loss of $864 million in the prior year.

"We said we would be running a growing, profitable company a year ago, and we did exactly what we said," Schwartz said.

The company is still a long way from its dot-com heights. Sun's last profitable year was 2001, when it rang up more than $18 billion in sales and had more than $920 million in profit.

Sun said it expects revenue growth for fiscal year 2008 to be in the low- to mid-single digits.

"I like that they're not growing revenues at breakneck speeds," said Anders Bylund, analyst with The Motley Fool. "That might sound weird, but they're not chasing bad sales, low-margin sales. They're not desperate to land contracts."


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