Sun sides with analysts on revenue estimates

Sun Tuesday provided analysts with a glimpse into its finances for the current quarter, predicting that it would meet revenue estimates despite a challenging market for sales of its server hardware.

“Based on our current view, we expect a seasonal sequential uptick in revenue,” said Steve McGowan, Sun’s CFO and executive vice president of corporate resources, during a conference call to discuss its fiscal second quarter results.

Sun reported revenue of $2.7 billion for its first quarter. For the second quarter, which ends Dec. 31, analysts expect the company to report about $2.9 billion in revenue, according to a consensus estimate collected by First Call/Thomson Financial. 

McGowan said Tuesday that Sun’s actual revenue would be “in line with the current consensus figure.”

He wouldn’t comment on earnings per share estimates during the call. Analysts on average expect Sun to lose a penny per share, according to First Call. Sun had not disclosed guidance for the quarter prior to its Tuesday conference call.

Operating expenses should see a “modest sequential increase” from the first quarter, due primarily to investments in research and development and dollars spent on acquisitions, McGowan said. In the past three months, Sun has announced the acquisitions of Pirus Networks and Terraspring, both of which are intended to boost its offerings around storage and network management.

Sun is close to completing its recent round of staff cuts, which is expected to lop 4,400 employees from its work force. “We are substantially complete in the U.S. We expect the majority of international reductions to conclude by the end of the third quarter,” McGowan said.

In a research note issued Friday, investment bank Sanford C. Bernstein said that weak demand for Sun’s hardware products, particularly in Europe and Canada, doesn’t bode well for Sun’s second-quarter revenue.

“In short, we see no upside to revenue expectations coming out of the mid-quarter call, and some possible downside,” analyst Toni Sacconaghi Jr. wrote.

Sacconaghi also questioned the success of Sun’s entry into the low-end Linux server business. The company unveiled in August the LX50, an Intel-based server that runs a version of the open source operating system from Sun. The research firm estimated that Sun sells less than 500 LX50 servers each month.

“We continue to believe that Sun’s Linux offering will not have a material impact on the company for at least the next year,” Sacconaghi wrote.

Sun wouldn’t comment Tuesday on the success of individual products or regions. “It’s a very competitive environment. I don’t want to single out any products or time zones,” McGowan said. “Our sales force is aggressively going out and winning business.”