Sun is on the Ascendance Again

Indicating that its recent run of losses is a thing of the past, Sun Microsystems Inc. posted a third consecutive profitable quarter on Monday. Announcing its fourth fiscal quarter financial results, the software and server giant beat Wall Street expectations and posted earnings of $329 million. Sun had announced a $301 million loss for the same period last year.

Sun’s continued profit announcements means its stock is definitely on an upsurge now. The announcement has caused a more than 10 percent hike in shares. The earnings for the fourth fiscal quarter translate to a profit of 9 cents a share, almost double the 5 cents a share prediction by analysts at Wall Street.

The per-share profit does not take into account stock-based compensation and related one-time charges. The profit announcement puts Sun firmly on the path of recovery, after losses worth $5 billion since the dot com bubble burst.

The profits are a result of wider acceptance during this quarter of its open source operating system and reduced expenditure margins. Overall revenues for the quarter stood at $3.84 billion, bettering its $3.83 billion last year. These revenues were on par with the predictions made by analysts.

A change in top management seems to have done Sun a world of good. Last April, co-founder Scott McNealy made way for Jonathan Schwartz as the chief executive. Scott has been working zealously at reducing cost.

Some of the steps Sun has taken in this direction include trimming its operating expenses. During the last quarter, the company has seen a 25 percent reduction in costs associated with research and development and administration. The numbers for these during the latest quarter results stand at $1.49 billion, down from the $1.97 billion last year.

Cutting costs is just one of the factors contributing to Sun’s profitability, according to current CEO Schwartz in an interview to the Associated Press. Other factors that have worked in its favor include increasing profits from its product line and a shift to virtualization with regard to its corporate data centers.

Sun Microsystems' cash cow for the fiscal year 2007 has been sales. The company announced sales worth $6.46 billion during this period. This is an 8 percent upsurge from the approximately $6 billion in sales the company garnered last year.

Overall revenues for the year stood at $8.77 billion, constituting a 5 percent jump from the previous year. Sun had announced overall revenues of $8.37 billion last year. With Monday’s announcement, share prices at Sun increased by 52 cents to $5.41. Prior to the announcement, stock prices had actually gone down by 3 cents to $4.89.