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Sun Microsystems Swings to a Loss; Sales Beat Expectations

July 26, 2006|From the Associated Press

Server and software maker Sun Microsystems Inc. swung to a fiscal fourth-quarter loss as restructuring, acquisition and stock-based compensation costs absorbed revenue that grew 29% and beat analysts' expectations.

The Santa Clara, Calif.-based company lost $301 million, or 9 cents a share, for the three months ended June 30, compared with net income of $50 million, or 1 cent, in the same quarter last year. Sales rose to $3.83 billion from $2.97 billion.

With annual revenue that has declined in four of the last five years, Sun has wracked up net losses of more than $5.33 billion since 2002, when computer-related spending dried up and lower-cost offerings from competitors encroached on its turf.

But 2006 revenue grew 18%, and executives on a conference call reiterated comments they made in May that they were feeling more confident that business was stabilizing. Shares rose after Chief Financial Officer Mike Lehman repeated a forecast for Sun to turn a profit in the fourth quarter of this fiscal year.

Sun's results included at least $509 million in one-time expenses, including $228 million for restructuring, $156 million for acquisitions and $63 million for stock compensation, the firm said Tuesday. They were offset by income of $54 million in a settlement with Microsoft Corp. and an $8-million tax benefit.

Excluding one-time items, Sun would have broken even on a per-share basis.

On that basis, which doesn't comply with generally accepted accounting principles, Sun beat the average analyst estimate of a loss of 3 cents a share in a Thomson Financial survey. Sun's revenue also topped expectations of $3.6 billion.

Lehman said revenue in the current quarter would fall about 20% from the previous period, which would translate into sales of $3.06 billion. Analysts have projected sales of $3.13 billion.

Sun's results were released after markets closed. In extended trading, its shares rose 1.5%. In regular trading, they gained 7 cents, or 1.7%, to $4.09.

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