Sun beats Wall Street's revenue, earnings forecast

Updated at 2:36 p.m. PST with analysts comments and comments from Sun's earnings call.

Sun Microsystems announced Tuesday fiscal second-quarter revenue fell nearly 11 percent, but the hardware maker's revenue and earnings came in stronger than Wall Street's expectations.

Shares of Sun rose as high as 9.7 percent to $4.38 a share in after-hours trading.

The company generated $3.22 billion in revenue during its fiscal second quarter, down 11 percent over the comparable period last year but up 7.7 percent sequentially. Analysts had expected the company to generate $3.16 billion in revenue, according to Thomson Reuters.

And during the quarter, its net loss reached $209 million, or 28 cents a share, compared with a net profit of $260 million, or 31 cents, a year earlier. But excluding special charges and other items, Sun generated a net profit of 15 cents a share. Wall Street was expecting a loss of 10 cents a share, excluding items, according to Thomson Reuters.

"Revenues and earnings did slightly better than what the street was expecting, especially after their business fell off a cliff in the September quarter," said Brent Bracelin, an analyst with Pacific Crest Securities. "The industry has not improved since their September quarter and there has been further erosion, so for Sun to show roughly 8 percent revenue growth sequentially, and a return to profitability, shows they are doing a good job controlling expenses and bringing in revenue."

During the quarter, Sun announced plans to cut up to 6,000 jobs, or roughly up to 18 percent of its worldwide workforce.

Although Bracelin applauds Sun's performance in its fiscal second quarter, he noted the company is by no means out of the woods.

Each of the past four quarters have show a continual decline in year-over-year revenue growth, he noted. In the March quarter last year, Sun's year-over-year revenue growth was flat and the downward trend continued to reach its greatest drop of nearly 11 percent in the quarter the company just completed.

Sun declined to offer its forecast on how the rest of its fiscal year will perform, a move that is increasingly being made by a number of tech companies as the economic firestorm obscures visibility for the remaining quarters.

During the second quarter, Sun's CEO Jonathan Schwartz noted the company's customers were a mixed group on their interest in doing business with the server and storage maker.

Social media companies, for example, were very aggressive in their need to expand their systems, while other corporate titans were putting off enterprise resource planning orders and the systems to run them.

[JoeF2]

So I guess the predictions of Sun's demise were a bit premature.

[joetesta70]

2 comments...I think that says it all... LOL

[pokiri]

Sun's demise had been predicted 4 or 5 times ( each time the analysts claiming "this time it will be done" ). It is quite boring the demise story is not getting realized.

[Waam]

Still, SUN needs to work on it's second act and come out with something truly revolutionary or atleast evolutionary. Contemporaries like Microsoft and Apple and passed SUN a few times around the track with this already.

[davidherron444]

"Beating estimates" doesn't mean Sun is out of the woods. It just means that Sun's revenue decline was less than the guesses made by analysts. "Analyst estimates" are simply guesswork done by financial analysts. This does not mean Sun's revenue situation is healthy.

[JoeF2]

Sure, it's guesswork, but it's supposed to be educated guesses.
And given that the stock market ups and downs rely on these guesses, there is some pressure on analysts to not get it too wrong.