Sun suffers on Wall Street despite recording profit

Sun suffered on Wall Street in after hours trading after posting lower than expected revenues and missing analyst expectations.

The company looked to have turned a corner, and for the preceding two quarters had managed to show year on year growth. But its Q2 revenues of $2.84bn were down 1.6 per cent by comparison. Sun’s shares were off nearly five per cent on the news.

This in part is down to the server market direction in general. CEO Scott McNealy said that his company was shipping its cheaper x86 server boxes in ever greater numbers. And Sun is looking to grab its share of this exploding market. The problem is that as these boxes grow in power and can take on ever more demanding and varied workloads, it starts to eat into the market for higher-end and far more expensive machines that Sun also sells.

Still, the Unix company ultimately recorded a profitable quarter, with a net income of $19mn, having put a number of efficiencies in place to boost its margin by half a per cent year on year. It also added $52mn to its coffers, bringing its cash balance to nearly $7.5bn.

‘The second quarter delivered many positives, including x64 and x86 server unit volume growth, positive cash flow from operations, and stunning market reviews of Solaris 10 OS. It feels good to ring up a modest GAAP profit,’ said McNealy. ‘Sun has one of its most rock solid product line-ups in history today. Innovation is increasingly marked by business models as much as technology. Sun’s $1 per CPU/hour and the Sun Java Enterprise System are emerging models for recurring revenue. We are clearly reestablishing relevance in key markets.’

Yet despite Sun’s innovations for the future of computing, and buying it, the company hasn’t given any guidance for the current third quarter. Analysts estimate sequentially lower revenues of $2.79bn, 5.4 per cent ahead year on year.