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Sun's fourth quarter jumps 42%

Sun Microsystems beats analysts' estimates by a bit, reporting fourth-quarter earnings of 61 cents a share on revenues of $2.5 billion.

Sun Microsystems (SUNW) today beat analysts' fourth-quarter estimates, as revenues jumped 26 percent as a record number of products were sold.

The workstation maker reported earnings of $237.2 million, or 61 cents a share, for the period ending June 30, up from $122.3 million, or 31 cents, a year ago.

Sun's revenues soared to $2.5 billion for the quarter, a substantial jump from $2 billion a year ago.

For the fiscal year, Sun reported revenue of $8.59 billion, or $1.96 per share, up 21 percent from last year's $7.1 billion, or $1.21 per share. Net income for the year was an all-time high of $762 million, up from $476 million in fiscal 1996.

The results were slightly higher than projected.

Analysts predicted quarterly profits of 58 cents a share for the quarter ended June 30 and net income of $1.87 a share for the fiscal year, according to First Call. However, analysts' "whisper" said that quarterly earnings could easily sneak up to 60 cents a share and $1.90 for the year. Historically, Sun orchestrates its pre-earnings information so that it beats expectations.

The company's growth has come largely at the expense of other Unix vendors, analysts said. Although the Unix market has remained relatively flat during the year, clipped by the growth of Windows NT as a server and workstation operating system, Sun has become a more dominant Unix player than ever, especially in server sales.

"The Unix market is not growing. But Sun has been gaining on Hewlett Packard (HPW), Digital (DEC)," said Jay Stevens, an analyst at Buckingham Research Group. Stevens predicted Sun would report quarterly earnings of 56 cents per share and $1.85 for the fiscal year.

Daniel Kunstler, senior equity analyst at J.P. Morgan Securities, who expected earnings per share of 57 cents with room to move upward, said that Sun will likely continue to pursue high-end servers in fiscal 1998 as one of its major businesses. "The story is in the servers," he said. Sources at Sun also recently said that the company will pursue low-end workstations in the coming fiscal year as well.

Kurt King, an analyst at Montgomery Securities, predicted earnings of 56 cents per share.

"It's the servers. They are the most aggressive by far in the Unix arena," King said.

But Sun's quarterly earnings could reach as much as 60 cents a share, everyone said said. "They always underreport. It's by design," King said.

Sun said that their product mix did not radically change during the quarter.

For fiscal year 1996, Sun reported operating earnings of 43 cents a year before and 32 cents after acquisitions charges. For the year, Sun's actual annual earnings per share were $1.33. First Call's figures accounted for a stock split during the year, but not charges associated with acquisitions.