Sun Microsystems provided a ray of sunshine on Tuesday in an otherwise depressed week for technology stocks, when it announced first quarter net income up 46 per cent on last year, surpassing Wall Street expectations.
Net income of $123.4 million or 63 cents per share was above the 61 cents predicted by most analysts, while revenue rose 25 per cent to $1.9 billion. However, Sun?s share price actually fell over the day, reflecting fears that it cannot sustain its high profit margins, since it has been forced to lower prices on some products recently.
The main factor behind the growth was a boom in sales of its high end servers to corporate and Internet sites. With Sun?s Ultrasparc machines beating rivals from Hewlett-Packard and Silicon Graphics to market, the company has had problems meeting demand and currently has a backlog across its range worth $420 million.
President Scott McNealy said one major reason for Sun?s success is its reliance on homegrown technology such as Sparc chips and the Solaris operating system, rather than basing products on Intel and Microsoft technologies. ?It turns out you can make money and make margins by going it alone,? he told the analysts? conference.
He believes the main growth area for the second half of the year will be the recently announced network computers for Java.
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