Sun Microsystems Has Strong Q1

Sun Microsystems says revenues for the first quarter grew to $2.628 billion, an increase of 3.6 percent as compared with $2.536 billion for the first quarter of fiscal 2004. Total gross margin as a percent of revenues was 39.8 percent,

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Sun Microsystems says revenues for the first quarter grew to $2.628 billion, an increase of 3.6 percent as compared with $2.536 billion for the first quarter of fiscal 2004.

Total gross margin as a percent of revenues was 39.8 percent, a decrease of 0.3 percentage points as compared with the first quarter of fiscal 2004. Excluding the $82 million charge related to a litigation settlement with Kodak, gross margin would have been $1.128 billion, or 42.9 percent on a non-GAAP basis. Net loss for the first quarter of fiscal 2005 was $174 million or $0.05 per share as compared with a net loss of $286 million or $0.09 per share for the first quarter of fiscal 2004. This loss includes a charge of $108 million for previously announced workforce and real estate restructuring, an $82 million charge related to litigation settlement, a $4 million loss on equity investments, and a $7 million benefit for related tax effects. Excluding these amounts, net income for the quarter on a non-GAAP basis would have been $13 million.

Cash generated from operating activities was $124 million for the quarter, and the balance of cash and marketable debt securities was $7.433 billion.

“The first fiscal quarter is usually our toughest but the management team executed well operationally,” said Scott McNealy, chairman and chief executive officer, Sun Microsystems, Inc. “Following a solid June quarter, we now have two quarters in a row of year over year revenue growth. And we are on the offense again as a result of our newly revamped product line, a result of our sometimes controversial but continued commitment to R&D investments in the last three years. Stay tuned as we announce Solaris 10 OS in November. We believe this is one of our best new products in maybe a decade. And it runs on Opteron and SPARC.”

Steve McGowan, Sun’s chief financial officer and executive vice president, corporate resources, said, “We’re very pleased with fiscal Q1 results. We grew revenue year-over-year for the second consecutive quarter, increased our gross margin percentage sequentially, lowered combined R&D and SG&A spending by over $260 million sequentially, and generated positive cash flow from operations.”

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