Earnings forecast bright, as Sun stock rises
Sun Microsystems, boosted by its association with the Internet, is expected to continue its profitability streak when it reports third-quarter earnings later today.
- Shankland covered the tech industry for more than 25 years and was a science writer for five years before that. He has deep expertise in microprocessors, digital photography, computer hardware and software, internet standards, web technology, and more.
The company is expected to report profits of 35 cents a share, according to the consensus of analysts reported by First Call.
"They have certainly been doing well on servers in the key areas of the market that are the most rapidly growing"--in other words, the Internet, said Goldman Sachs analyst Laura Conigliaro. Sun computers are the hardware most often identified with the Internet, she said.
Analysts also expect Sun to benefit from its partnership with America Online, which beefs up the company's Web software presence and gives Sun a major new hardware customer.
Sun stock has been rising steadily since October, reaching an all-time high of $72.5 per share last week. Also last week, the company split its stock two-for-one.
The stock price of Sun's major competitors, IBM and Hewlett-Packard, also has risen--but not at the pace set by Sun.
Conigliaro had set a goal of 20 percent revenue growth but said the company may exceed that. "We are thinking they had a strong quarter and can do a little better than 20 percent revenue growth," she said.
In the third quarter a year ago, Sun had revenues of $2.4 billion. Last quarter, Sun had revenues of $2.8 billion.
Sun got its start making workstations that were popular with programmers and researchers, but the company then pushed into servers--the computers that make networking possible. Sun's machines are now vastly more powerful, but have stayed true to the company's Unix roots.
Though Sun doesn't approach IBM in the reach and comprehensiveness of the consulting services it sells, the company is no longer ridiculed, Conigliaro said. That's because Sun has genuinely improved some of its services, but also because it has expertise in some new areas such as e-commerce.
The company also has been emphasizing software: focusing on its Solaris operating system, server programs to handle tasks such as managing email or creating customized Web pages, and its "write once, run anywhere" Java technology.
Java took a step forward last year with the unveiling of Java 2, which improved security and interface features of the system. Ironically, the initial release was only for Windows--the operating system of Sun archrival Microsoft--and it wasn't until yesterday that Java 2 was available for Sun's own operating system.
Java also is an entree for Sun into the "embedded" market--electronic equipment like cell phones, factory robots, or personal digital assistants that have computing abilities but that usually hide the intricacies from the user.
Sun is working on new versions of Java as well as Jini, which is special software that allows Java-enabled devices to automatically connect together over networks and use each others' services.