In a quarter marked by big internal transitions, Sun managed to deliver solid earnings and profit growth.
Sun on Thursday announced revenues of $2.78 billion for its second fiscal quarter, up 14 per cent over last year. Profits were up 22 per cent to $272 million or $0.67 a share before acquisition related charges. This just barely beat the consensus analyst estimate of $0.66. After one time charges, net income was $261.1 million.
"This quarter has been one of the most difficult in terms of operational challenges," said Mike Lehman, vice president of corporate resources and chief financial officer. In the quarter, the company transitioned to a new order processing system.
"We are now a $10 billion company without a mainframe," said chief operating officer Ed Zander, adding: "And we don't have any Microsoft applications."
For the second consecutive quarter, Sun's sales were up in Japan, a result Lehman called "encouraging". Results in the rest of Asia were mixed, he said. He added that he expected few ill effects from the current economic upheaval in Latin America. The area only accounts for between two and four per cent of sales, Lehman pointed out.
In Europe, Sun posted solid gains with revenues up 22 per cent overall.
Lehman predicted stronger growth for the remainder of the fiscal year - something most analysts were already expecting.
Zander said Sun still expects to grow its desktop Unix business, despite the flattening out of the market. The company also expects to profit from the slipping schedule for Microsoft Windows 2000.
President and chief executive Scott McNealy briefly addressed the hype surrounding Linux. The free, open source Unix like operating system saw its market share triple last year to 17 per cent of the server operating system market, according to IDC data released this week.
"Linux plays in an area where Solaris is not very strong," said Scott McNealy. He said Linux sells mainly in notebook and desktop markets as well as "very low end servers."
"You'll be seeing incremental Linux strategies out of Sun," promised McNealy. These strategies will include promoting the use of Java on top of Linux.
"I think [Sun's] earnings were strong, under very difficult circumstances", commented Laura Conigliaro, an analyst with Goldman Sachs, "If NT is threatening them on the low end, it's not showing".
On Monday in San Francisco Sun will officially roll out its Jini technology, which will allow computers and intelligent appliances to connect seamlessly over a network.
Martyn Lambert, marketing director for Sun in the UK, said Europe's contribution to the results was again strong, particularly from the UK. He said he expected Sun to have an even busier calendar year ahead for product announcements and new initiatives. He insisted that rumours about the death of Unix, "continue to be greatly exaggerated."
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