July 15th, 2008
Sun: Business isn't so bad; It's actually decent
Worries about Sun Microsystems fourth quarter may have been misplaced.
The company said it expected to report net income between 5 cents a share and 15 cents a share. Excluding charges, Sun will report earnings of 25 cents a share to 35 cents a share. Wall Street was expecting earnings of 27 cents a share.
Sun also projected revenue between $3.72 billion to $3.8 billion with gross margins of 44 percent to 45 percent.
In a statement, CEO Jonathan Schwartz said that customers are looking toward open source software as a means to save costs in a tough economy. That’s a slightly different spin that what Sun used in May. In May, Sun announced layoffs and reported a disappointing third quarter. The poor economy was to blame at the time. Apparently, IT buyers got open source religion in the last 90 days or so and are buying.
According to Citigroup analyst Richard Gardner Sun closed deals that slipped from the third quarter in the fourth quarter. Couple that fact with layoffs and Sun was expected to at least meet expectations. However, Gardner questioned whether Sun was a place to put your money.
In a note Gardner said:
At just 10X F12 earnings, JAVA shares are inexpensive. However, value investors are already in the shares and growth investors are not likely to build positions given the 12-month delay in JAVA’s high-end SPARC refresh and a potentially growing disadvantage in demand generation investments. We see long-term value, but only for the most patient of investors.
Nevertheless, someone was putting some money into Sun–even if it was to close short bets. Sun shares were up about 13 percent afterhours.
Larry Dignan is Editor in Chief of ZDNet and Editorial Director of ZDNet sister site TechRepublic. See his full profile and disclosure of his industry affiliations.
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