Sun reports Q2, posts profit

From AP coverage on Friday

Sun logoThough happy about Sun Microsystems Inc.’s second-quarter results, investors remained wary about the server and software maker’s ability to prosper under intensifying pressure from rivals.

Sun’s reported earnings were better by a smidge — if by “smidge” I mean penny, which I do — than analyst estimates, and shares were up to $16.83 as trading started on Friday.

…The stock has declined steadily since [the November 1-for-4 reverse stock split] on fears about Sun’s competitiveness and future profitability.

Sun executives sought to assuage those fears by reiterating its financial guidance of low- to mid-single-digit sales growth in 2008. Revenue is expected to grow more than 5 percent in the second half of the fiscal year.

(Hyperlink added by me). Sales were up, and gross margin was up. The company says its making more money on datacenter gear (complicated servers and storage gear), which is a little odd given the statements by Brian Cinque that Sun IT is ditching all such internal gear (me here and in comments here, Ashlee Vance here, Nick Carr here).

Still, investors worried whether Sun can weather intensifying competition from rivals such as IBM Corp. and Hewlett-Packard Co. in the market for the servers that power corporate data centers and services to support them.

Sun has broadened its strategy of partnering with one-time foes to increase the adoption of Sun products, but the strategy has some shareholders worried that it will actually speed the adoption of rivals’ products at Sun’s expense.

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