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Sun's stock shines

Sun Microsystems' stock rises more than ten percent after the company reported a 41 percent jump in second-quarter profits.

Shares in Sun Microsystems (SUNW) rose more than ten percent today after the company reported a 41 percent jump in second-quarter profits.

Sun's stock ended the day at 31-1/8, up 2-7/8 from yesterday's close. Heavy demand for its Unix servers on intranets and the Internet helped the company beat Wall Street's profit estimates yesterday.

Sun reported net profits of $178.3 million, or 46 cents a share, for the period ending December 29, compared with net income of $126 million, or 32 cents, a year ago. Analysts were expecting the company to report a profit of 42 cents a share, according to First Call.

While analysts credited the company's growth mainly to strong sales of its UltraSPARC line of Unix hardware servers, Sun also gained ground in the workstation market. In addition, the company has successfully maintained its lead over personal workstations, high-end PCs running the Windows NT operating system, from companies like Compaq Computer, analysts said.

"In my opinion, it's a huge overstatement to say that NT workstations are going to supplant Unix workstations in the traditional vertical markets," said Doug Van Dorsten, research analyst with Hambrecht and Quist. "If the Unix guys stay standing still, they'll be overrun by NT. But they're not standing still, particularly for scalability, system cost, and performance."

Last quarter, Sun received a windfall of publicity, though few if any profits, from Java, analysts said. The company licenses the technology to everyone from operating system vendors to smart card companies, sells a Java application development tool, and is developing a line of microprocessors optimized to run Java programs.

"The JavaSoft division is operating pretty close to break even," said C.B. Lee, an analyst with investment firm Sutro and Company in San Francisco. "I believe JavaSoft revenues were about $50 million for the last fiscal year. JavaSoft is not profitable but more strategic."

Sun reported record revenues of $2 billion for the quarter, up nearly 19 percent from the same time last year.

Sun officials may hope that Wall Street takes a different tack than the way it responded after the company reported higher-than-expected first-quarter results. Sun's stock dropped by as much as 10.9 percent as investors grabbed profits from a rise in the share price during the preceding days.