Sun beats the Street
Networking outfit beats forecasts by six cents, raises revenue, EPS forecast
NEW YORK (CNNfn) - Sun Microsystems Inc. on Thursday reported a fiscal fourth-quarter operating profit of 39 cents per share, beating Wall Street's expectations.|
Executives at Sun in Palo Alto, Calif., also bumped up their fiscal 2001 revenue and earnings targets based on soaring demand for the company's computer-networking products.
Before one-time items, Sun, a leading supplier of network-computer hardware, software and services, said it earned $659.5 million, or 39 cents per share.
Analysts polled by earnings tracker First Call had expected to see a profit of 33 cents per share during the quarter.
Meanwhile, sales came in at $5 billion, up 42 percent from $3.5 billion during the year-ago quarter.
"Demand has continued to be greater than we were forecasting," Michael E. Lehman, Sun's chief financial officer, told analysts during a teleconference Thursday evening.
"Bookings were 54 percent, well above what have been experiencing recently," Lehman added.
For the full fiscal year, which ended June 30, Lehman said Sun set annual financial records for bookings, revenue, gross margin, net income and earnings per share.
During the fourth quarter, one-time items resulted in a net gain of $92.7 million. These items included gains on the sale of equity investments of $95.8 million and an acquisition-related charge of $3.1 million. Including these items, Sun's net income was $720.4 million, or 42 cents per share.
For the full fiscal year, Sun reported $15.721 billion in revenue, up 33 percent over the corresponding period a year ago. Operating income for the year was $1.7 billion, up 49 percent from the same period a year earlier, the company reported.
Earnings per share for fiscal 2000, excluding special items, totaled $1.02, an increase of 46 percent from the previous year's results. Including special items, net income was $1.854 billion and earnings per share totaled $1.10 for the fiscal year, Sun said.
"There wasn't anything in the quarter in any product area that the company did not shine on," said Goldman Sachs analyst Laura Conigliaro.
Looking ahead, Lehman said the fourth-quarter's strong sales and better-than-expected bookings has prompted Sun to raise its fiscal 2001 revenue and earnings targets.
During the fiscal third-quarter, Sun had provided a long-term revenue growth forecast of 25 percent. "I would now characterize our fiscal 2001 revenue growth at pushing 30 percent," Lehman said.
He added that earnings-per-share should grow at a rate equal to or slightly below the revenue growth rate in the coming year, with particular strength in the first half.
Sun (SUNW: Research, Estimates) shares rose 4-1/8, or 4.4 percent, to 98-1/16 in Nasdaq trade ahead of the earnings announcement. They soared to 103-3/4 in after-hours trade.
Click here to see which stocks are moving in after-hours activity
The company, which has seen its stock more than double over the past year as it has aggressively gone after dot.com companies and Internet service providers as they expand their network infrastructures, lists computing heavyweights IBM (IBM: Research, Estimates) and Hewlett-Packard (IBM: Research, Estimates) among its top competitors in the market for UNIX servers.
And Sun has been doing its best to widen the gap between it and its nearest competitors.
Citing information compiled by technology research firm International Data Corp., Ed Zander, Sun's president and chief operating officer, said that during the first quarter of calendar year 2000, Sun was roughly 25 percent larger in server revenue than Hewlett-Packard and 80 percent larger than IBM. During that same period, Sun's server shipments grew 51 percent, while IBM's shipments rose 14 percent, and Hewlett-Packard's rose 11 percent.
"This is effectively a complete reversal in market share position from two or three years ago," Zander, said. "We expect to grow these numbers substantially when the current quarter's data is reported. IBM's reported decrease of 5 percent in hardware revenue yesterday is an early indicator."
IBM on Wednesday did report that its hardware revenue in the most recent quarter slipped 5 percent to $9.2 billion. However, at the same time, IBM said its Web-server revenue increased almost 30 percent from the same period last year.
For its part, Sun said it shipped roughly 100,000 servers during the most recent quarter.
"We had records in low-end, mid-range and high-end servers," Zander said. "In fact all of these server categories grew by at least 60 percent, with some areas as high as 80 to 100 percent."
Both IBM and HP recently have boosted their efforts in the market for UNIX servers, and each has reported it is making headway there. But Sun, because it historically has been a strong player there, has a solid footing in the increasingly competitive landscape, according to Goldman's Conigliaro.
"The market is very strong for the kind of products they're selling since there's been a very noticeable shift in IT spending toward e-business products and projects," she said. "Sun is definitely maintaining its strong lead. It's true that IBM and HP are picking up some traction, and both of those companies are growing more rapidly in the enterprise space. But so is Sun. They are not picking up ground versus Sun."