Sun Thursday reported modest earnings that were in line with Wall Street expectations for its second fiscal quarter of 2005, which ended December 26, but the company fell short on the revenue side.
Sun Thursday reported modest earnings that were in line with Wall Street expectations for its second fiscal quarter of 2005, which ended December 26, but the company fell short on the revenue side.
The Santa Clara computer maker reported revenue of $2.84 billion and earnings of .01 cent per share. Revenue declined by 1.6% from the $2.89 billion generated during the company’s 2004 second quarter.
Net profit for the quarter was $19 million, when calculated on a GAAP (generally accepted accounting principles) basis.
Sun’s executives attempted to put a positive spin on the news, pointing to volume growth in the company’s Xeon- and Opteron-based systems. The company now has “one of its most rock solid product line-ups in history,” company chairman and chief executive officer Scott McNealy said in a statement.
Still, the financial analyst community had been expecting more.
Analyst consensus was for Sun’s revenue to be up from the year-ago quarter and reach $2.93 billion with earnings of .01 cent per share, according to a survey of financial analysts by Thomson First Call.
Sun’s revenue has failed to grow more than 1% for 15 consecutive quarters, according to a report released Thursday by analyst firm Sanford C. Bernstein & Co.
“Our channel checks indicate that Sun’s business did not experience material improvement in the quarter and that the final weeks of December were somewhat disappointing,” Sanford C. Bernstein analysts wrote in a report released before the earnings announcement on Tuesday.
Sanford C. Bernstein, which issued a downgrade on Sun’s stock last week, said that the company’s financials are unlikely to improve over the next several quarters.
The growth of Sun’s Java Enterprise System (JES) middleware has tapered off somewhat as the company looks for new customers outside of its existing customer base, Jonathan Schwartz, Sun’s president and chief operating officer, said on a conference call with financial analysts on Thursday. Sun said it has now sold 418,000 of the licenses, up 73,000 from the previous quarter’s tally, but not as great an increase as Sun has seen in previous quarters.
“After the first six to nine months … we were out looking for new customers, and building new demand is a little bit tougher,” Schwartz said.
The JES, which Sun has been selling for a year and a half now, is offered on a per-employee basis and is one of a number of Sun products sold along unconventional pricing models. Sun has also offered $1 per processor per hour pricing for some of its server products and even experimented with selling new products on eBay’s Web site.
Though analysts have suggested that Sun may be rethinking the way it sells JES, the company plans to spend some of the $7.5 billion, it now holds in cash and securities on similarly novel pricing initiatives, including a plan to sell its SunRay thin client desktop on a per-week basis, according to McNealy, who also spoke on the call.
“We’re going to be investing some capital into the N1 Grid (System), as we offer CPU hours, gigabyte months, and ultimately SunRay desktop weeks out to the marketplace,” McNealy said.
Sun’s CEO did not rule out the possibility that his company may do some shopping in the year ahead, as well. “We will also continue to look at opportunistic acquisition candidates as we buy IP or expand the channel going forward,” he said.
Shares of Sun’s stock ended the regular trading day on the Nasdaq stock exchange down .03 cents, trading at $4.58. In after-market trading on INET, the stock fell further, reaching $4.42 Thursday evening.
