Update: Sun posts Q2 loss, vows return to profitability

Sun Microsystems Inc. unveiled its second-quarter results for fiscal 2002 on Friday, reporting revenue slightly higher than expected but still posting substantial losses compared to the same period last year.

In a conference call with analysts, however, Sun Chief Financial Officer Michael Lehman said the company is on track to return to profitability in by the fourth quarter of the fiscal year.

"We have clearly made real progress over the last 90 days," said Lehman.

Sun's revenue for the quarter, which ended Dec. 30, 2001, came in at $3.11 billion, a decrease of 39% compared to the second quarter of the previous year, the company said in a statement. The company did manage to post a sequential revenue increase of 9% from the first quarter of 2002 to the second quarter, however.

Net loss for the quarter -- excluding investment losses, restructuring costs and other, one-time charges -- was $99 million, or 3 cents per share. In the year-earlier quarter, Sun had net income, excluding special items, of $494 million.

A Thomson Financial/First Call survey of analysts had predicted a second-quarter loss of 4 cents per share and revenue of $3.09 billion.

Including investment losses and other special charges, the net loss for the second fiscal quarter was $431 million, and the net loss per share was 13 cents.

"Sun's vision, strategy and execution continue to provide focus and strength in this difficult economic environment," Sun Chairman and CEO Scott McNealy said in the statement. "We're innovators, pure and simple -- always have been, always will be. ... As economic conditions improve throughout the industry, Sun has never been better positioned."

"We are showing signs of progress," Lehman said. "Despite economic uncertainties, Sun still is investing in product development and core competencies to promote the long-term growth of the company."

During the conference call, Sun executives touted the company's successful integration of new products into their range of offerings, as well as a substantial inventory reduction.

During the quarter, Sun launched products and services including the Sun Open Net Environment, designed to help developers create and deploy applications over the Web, and started volume shipments of the Sun Fire 15K and the Sun Fire V880 servers.

However, McNealy said the terrorist attacks of Sept. 11, fierce market competition, and hefty restructuring charges posed serious challenges during the quarter.

"I'm kind of glad we put that year behind us," he said.

Besides a sluggish economy and the effects of Sept. 11, Lehman said that increasing worldwide competition was taking a bite out of the company's profit margins. But McNealy seemed confident that Sun could triumph over rivals, especially IBM.

"We are in a ground war with IBM Global Services," he said, "and we're not going to back off."

In its arsenal, McNealy cited the company's focus on products, its numerous partnerships and the Sun-initiated Liberty Alliance Project, which aims to create a common technology for identifying users on the Internet. The Liberty Alliance Project will compete with Microsoft Corp.'s .Net services including Passport, which offers Web surfers the ability to log on to multiple Web sites without re-keying personal information.

"We are very excited about the strong demand for our products," said Sun Chief Operating Officer Edward Zander.

Related stories and links:

Copyright © 2002 IDG Communications, Inc.

7 inconvenient truths about the hybrid work trend
Shop Tech Products at Amazon