It was a week later than expected, but the behavior was the same. After the stock market closed on Friday and everyone was heading home for the weekend, server and operating system maker Sun Microsystems snuck out its financial results for the first quarter of fiscal 2010. Revenues fell 25 per cent to $2.24bn.
Sale have been hammered by the uncertainty surrounding the fate of Sun's products as the $7.4bn acquisition of Sun by Oracle is held up by European antitrust regulators, but through deep cost cutting, Sun was able to report a mere $120m loss in the quarter, a far cry better than the $1.68bn loss it booked in the year-ago quarter.
As has been the case since the Oracle deal was announced, neither hide nor hair of Sun's top brass - chairman, Scott McNealy; president and chief executive officer, Jonathan Schwartz; and chief financial officer, Mike Lehman - were to be seen as Sun dropped its Q1 fiscal 2010 results into the SEC's Edgar system and headed for the hills of Silicon Valley. Sun's executives have been muzzled so as to not upset any regulators and when they do speak, it seems to be from an Oracle script.
But Sun is still an independent company, you must remember, and one owned by its stockholders at that. It will be interesting to see what shareholders think if Oracle doesn't close the deal before December 17 and Sun's top brass have to face questions about their golden parachutes and how far Sun missed its revenue targets for fiscal 2009.
Some may even think that selling the company might not have been such a good idea and that the better thing to have done was to remain independent and fire 8,000 people to get costs in line with sales with a little profit left over. Had Sun done that - instead of doing an acquisition dance first with IBM and then being pushed into the loving arms of Oracle -it might be a profitable company talking about the expected upturn in sales that Cisco, IBM, and others are beginning to mumble about. But it was easier to sell out to IBM or Oracle than to face up to killing off the "Rock" UltraSparc-RK processors and sorting out some sort of coherent strategy with partner Fujitsu for Sparc servers and Intel and AMD for x64 servers.
Now Larry Ellison gets to decide what is coherent and what is not, and that is almost enough to make you miss Ed Zander, Sun's former and boisterous president during the dot-com days.
In the first fiscal quarter, Sun's product sales fell 32.7 per cent, to $1.19bn, while services revenues fell 13.9 per cent, to $1.06bn. Sun slashed its operating expenses by nearly a third, basically as it let go of employees and pulled back mightily on sales, marketing, public relations, and other efforts to peddle and promote products as well as its vaunted research and development, which accounted for only $354m in the quarter, down 16.3 per cent.
Those cuts are what allowed Sun to book a net loss of only $120m. But perhaps more significantly for an anxious Oracle, Sun's cash and equivalent hoard fell 16.7 per cent from the June quarter, to $2.38bn. This has the effect of making the Oracle offer more expensive.
As Sun has been doing for the past year, the company put together a presentation that shows Sun's billings for the quarter by product line. Not all of the billings make it in as revenue during the quarter, but most do. This is the best indicator of performance by product line that Sun has ever given, and honestly, it is the most detailed presentation that any IT vendor has ever given.
So when Schwartz and Lehman said they wanted Sun to be more transparent financially, they really meant it. I just think they had hoped the numbers would be better, and the transparency more helpful in boosting Sun's stock. Lucky for them, Sun's shares are held more or less in limbo despite whatever is going on in Sun's business because of the Oracle deal. If that were not the case, Sun's shares would have been hammered into the ground by now.
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