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Sun loss widens, but revenue increases

Server maker reports a net loss of $217 million despite 21 percent revenue growth.

Stephen Shankland Former Principal Writer
Stephen Shankland worked at CNET from 1998 to 2024 and wrote about processors, digital photography, AI, quantum computing, computer science, materials science, supercomputers, drones, browsers, 3D printing, USB, and new computing technology in general. He has a soft spot in his heart for standards groups and I/O interfaces. His first big scoop was about radioactive cat poop.
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Stephen Shankland
2 min read
Sun Microsystems on Monday reported a third-quarter loss of $217 million amid a climb in revenue, lifted by its purchase of Storage Technology last year.

The server and storage specialist said it had a loss of 6 cents per share in the fiscal third quarter, ended March 26. Its revenue increased 21 percent to about $3.18 billion, boosted by its acquisition of StorageTek in August.

Despite this, the Santa Clara, Calif.-based company still faces market challenges and skeptical investors, and its net loss was wider than the $28 million from the year-ago quarter. But Scott McNealy, Sun's CEO, took a cautiously bullish tone in a statement from the company.

"We're growing again. Products are winning awards. The Solaris 10 operating system is a runaway success. The next step is consistent profitability," McNealy said in the earnings announcement.

It's not yet clear how Sun fared compared with analyst expectations. Several charges would have knocked another 5 cents per share off Sun's results, the company said. However, the company didn't break out enough details for First Call to compare its results directly to the 6 cent loss analysts expected. However, revenue was 1 percent less than the $3.21 billion analysts expected on average.

Excluding $87 million in acquisition-related charges, $57 million of stock-based compensation charges, $36 million of restructuring charges, a $4 million gain on investments, and a $4 million tax benefit, Sun would have lost 1 cent per share, the company said.

Sun has been struggling to regain revenue growth and consistent profitability lost when the dot-com bubble burst years ago. Efforts include a serious entry into the market for servers using x86 processors such as Advanced Micro Devices' Opteron; the reinvigoration of its own Sparc processors and a Sparc alliance with Fujitsu; an effort to make nearly all its software free and open-source; and its Sun Grid effort to sell processing power by the hour.

Also on Monday, Sun announced that McNealy will step down as chief executive officer. Jonathan Schwartz, previously the company's president and chief operating officer, will take over. Chief Financial Officer Mike Lehman returned to Sun this year and is taking a "fresh look at everything."