January 20, 2000 6:30 PM PST

Sun's earnings continue to shine

Sun Microsystems, a company that's capitalizing on sales of servers that power the Internet, beat analyst expectations by a penny for its second quarter of fiscal 2000, posting a net income of 21 cents per share today.

Earnings in total were $353 million, up 30 percent over earnings of $273 million the like quarter a year before.

The company reported record revenues of $3.55 billion for the quarter, a 27 percent increase over the $2.78 billion garnered in the same quarter last year.

Analysts surveyed by First Call expected a net income of 20 cents per share.

In the last six quarters, Sun has reported earnings that four times beat estimates by a penny and twice by two cents.

Sun chief executive officer Scott McNealy attributed the growth to increasing market share in sales of its computers to companies that build the infrastructure of the Internet.

Revenues were strongest with Sun's high-end E10000 servers and its lower-end workgroup servers, chief financial officer Mike Lehman said in a conference call today.

The Sun earnings come on the heels of a deal with Enron Broadband Services. Enron will buy $350 million worth of Sun hardware and services as it builds a network to offer high-speed Internet access to its customers. As part of the deal, Enron will purchase 18,000 Netra and enterprise servers.

Sun announced it will also purchase high-speed video streaming services from Enron.

The deal is worth about $350 million in revenue for Sun over the next five years, McNealy said today in a conference call.

In addition, Enron will be among a group of companies that help to develop extensions to Sun's Java software to let it be used for automating network operations such as monitoring quality of service and billing for communications capacity, McNealy said.

Separately, 200 large customers are testing out pilot projects with the SunRay 1 "thin client," a terminal consisting largely of an LCD screen and a network connection to a server that runs the software a person uses, according to chief operating officer Ed Zander.

Sun won deals with 268 Internet start-up companies in the last 6 months, including HomeGrocer, Chipsot, Eve.com, Fogdog, KBKids, PetStore, Cyberasia and FusionOne.

Sun's upcoming UltraSparc III "Cheetah" chip, due to spread across Sun's entire computer line by the end of the year, will be available in versions running at 750 MHz as well as 650 MHz, Zander said.

The company is almost ready to send the final design of the UltraSparc III to the factory and the chip will be in production by the end of the second quarter, Zander said. In addition, another new sun chip, the MAJC, is scheduled to be released in the second quarter of this year.

Meanwhile, Sun continues to struggle with EMC in the high-end data storage market. In recent months, Sun has set up a sales force specifically trying to go after EMC's potential customers. "They are very formidable," Zander said.

 

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