Sun reports strong Q4 profits, but when will revenue follow?

Sun is improving its bottom line, but not yet its top line. To feel comfortable that open source is helping the company, we need to see sales growth.

Sun Microsystems continues its resurrection with an excellent Q4 2007 earnings report Monday. Yes, it seems that you can make grundles of money by giving things away. Like software. Lots of it. However it's not yet clear that Sun is making new money through open source, or simply finding new ways to save money.

Sun posted an 8.5 percent operating margin in its fourth quarter, more than double what the company had been projecting (4 percent). No wonder Jonathan Schwartz is crowing ("[W]e improved Sun's profitability by over a billion dollars").

Not everything is rosy, of course.

For example, Sun's revenue was nearly flat, with revenue from products actually down 1 percent (services revenue was up 3 percent). In addition, some argue that Sun's profit boost comes from a decline in chip prices, and not necessarily other cost-cutting measures.

Still, revenue for the year was up 6.2 percent to $13.87 billion. And, importantly, Sun's trajectory is positive, even if it's only anticipating a low-to-mid single-digit revenue increase in FY 2008. What could have been passed off as a blip, as a palliative measure to hide Sun's disease, really seems like a true resurgence. And yes, open source software is at the heart of Sun's improved financial performance.

Imagine that.

Tech Culture
About the author

    Matt Asay is chief operating officer at Canonical, the company behind the Ubuntu Linux operating system. Prior to Canonical, Matt was general manager of the Americas division and vice president of business development at Alfresco, an open-source applications company. Matt brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. He is a member of the CNET Blog Network and is not an employee of CNET. You can follow Matt on Twitter @mjasay.


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