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Sun Microsystems revenue misses estimates
2007-04-24
Computer maker Sun Microsystems Inc. (Nasdaq:SUNW) on Tuesday posted a third quarter net profit versus a year-ago loss, but revenue fell shy of analysts' estimates and shares fell about 5 percent. "Weak U.S. demand particularly in servers resulted in revenue coming in below our and the Street's estimates," wrote Goldman Sachs analyst Laura Conigliaro in a brief note to clients after Sun reported results. Sun said net income for its third fiscal quarter was $67 million, or 2 cents per share, compared with a year-ago loss of $217.0 million, or 6 cents per share. Revenue rose to $3.28 billion from $3.18 billion. Analysts had expected a profit of 1 cent per share, on average, according to Reuters Estimates, based on revenue of $3.42 billion. Sun reported an operating loss of $45 million. "We did face a difficult U.S. and U.K. market and specifically in March," Chief Executive Jonathan Schwartz said on a conference call with analysts. "A slow March certainly limited our overall growth rate." "People are a little concerned about the demand trends. It does suggest there could potentially be a slowdown in their server business," said Pacific Crest Securities analyst Brent Bracelin. "What had gotten people excited was their server business for the last three quarters grew." Schwartz said in a statement that the company remains committed to its fourth-quarter goal of reaching at least a 4 percent operating profit margin. Sun Chief Financial Officer Michael Lehman told analysts the company expects fourth-quarter revenue to increase 15 percent to 18 percent from the third quarter, with a gross profit margin of 42 percent to 44 percent. With the just-reported small profit, Sun has posted two quarterly profits in a row, following five quarters of losses. Since the implosion of the dot-com and telecommunications investment bubbles, Sun has suffered more than its main competitors IBM (NYSE:IBM), Dell Inc. (Nasdaq:DELL) and Hewlett-Packard Co. (NYSE:HPQ) In the last few years, however, the seller of computer servers, workstations, software, storage and services has revamped its product line. Among other things, it now sells servers powered by chips from Advanced Micro Devices Inc. (NYSE:AMD) and Intel Corp. (Nasdaq:INTC) Shares of Sun have risen 9.2 percent so far this year, based on Monday's closing price. Shares of HP are up less than 1 percent in the same time period. Shares of Dell are down 1 percent so far this year. In extended trade, Sun shares slipped to $5.62. In regular Nasdaq trade, the stock rose 2 cents to $5.94.
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