High-end computer maker Sun Microsystems swung to a quarterly profit from a year-earlier loss as it reduced costs, sending the company's shares up 10%.
Profit topped Wall Street targets at the world's third-largest maker of computer servers for businesses as Sun's operating profit margin reached 8.5%, topping its earlier goal of at least 4%.
Sun, which returned to profit in the second and third quarters after five consecutive quarterly losses, has tried to stage a recovery by revamping its product line, selling servers powered by chips from Advanced Micro Devices and Intel, among other moves. The company last year announced about 5 000 job cuts to reduce costs.
Net income was $329 million, or 9c per share, in the fourth quarter ended 30 June, compared with a year-earlier net loss of $301 million, or 9c per share. The profit beat analysts' average estimate of 5c per share, according to Reuters Estimates.
Revenue rose to $3.84 billion, matching analysts' estimates, from $3.83 billion, as services revenue rose slightly, and hardware revenue declined. Operating expenses fell 25% to $1.49 billion.
The fourth-quarter profit margin "marks significant progress toward our longer-term growth plan" of at least 10% operating margin for the 2009 fiscal year, CEO Jonathan Schwartz said in a statement.
Executives told analysts on a conference call that the company expects full-year revenue growth in fiscal 2008 in the low- to mid-single-digit percentage range.
Sun expects a profit margin of at least 8% in the fourth quarter of 2008.
The stock rose to $5.37 in extended trading following the earnings report after closing down 3c at $4.89 on Nasdaq. Shares of Sun, which also sells workstations, software, storage and services, have fallen 9.2% this year, as of Friday's close.
They trade at 54 times expected 2007 earnings per share, a premium to competitors International Business Machines and Hewlett-Packard, which both sell at about 17 times expected earnings.
Net revenue for Sun's products segment, including servers, data-storage equipment and software, slipped 1.3% to $2.49 billion in the fourth quarter, partly because of weakness in sales of storage products in the US and sales of older computer hardware.
Revenue from services rose to $1.34 billion from $1.3 billion.
Share