NEW YORK (CNN/Money) - Sun Microsystems Corp. reported a smaller-than-expected loss for the latest quarter Thursday, but sales at the maker of computers and Internet gear were sluggish.

Sun, a top supplier of UNIX servers, also said it cut would 11 percent of its work force of about 39,000 as it continues to struggle with slack demand for its products and services, but executives said they expect to post profits by the second half of the fiscal year ending next June.

Sun stock rose 9 cents to $3.08 in after-hours trading, a gain of about 3 percent, after rising 6.8 percent during the regular session.

Santa Clara, Calif.-based Sun reported a loss of 2 cents a share excluding one-time items for its fiscal first quarter ended Sept. 29, compared with a loss of 5 cents a share on the same basis a year earlier. Sales fell 4 percent to $2.7 billion from $2.9 billion.

Analysts on average had expected Sun to report a third-quarter loss of 4 cents a share on sales of about $2.86 billion, according to First Call, which tracks Wall Street forecasts.

Sun also said it will take a charge of about $300 million in the second quarter of fiscal year 2003. The company began its first quarter with 39,400 employees.

Sun (SUNW: Research, Estimates) said it continued to generate positive cash flow from operations in the third quarter, and executives in a statement stressed that the company paid off $200 million of debt and, "as a demonstration of faith" in the company, repurchased nearly $500 million of stock.

The company ended the quarter with $5.2 billion in cash and securities and total debt of $1.5 billion.

Looking ahead, Sun's new chief financial officer Steve McGowan said the company expects to return to profitability during the second half of the fiscal year ending next June. After cutting 4,400 jobs and closing certain facilities and assuming seasonal growth, McGowan said, "We look to be profitable in the second half of fiscal '03."

Sun announced in October 2001 its first major layoffs, a 9 percent cut in the work force that amounted to nearly 4,000 jobs, although some analysts had questioned whether that was enough, especially as the technology downturn has lengthened.

Sun has been especially hard hit by the dowturn in technology spending because its business model had been heavily reliant on dot.com companies and telecom service providers. Both those industries have suffered major meltdowns.  

-- Retuers contributed to this report