In its latest results statement Sun showed stronger momentum in storage products.
Revenues for the 4th quarter of 2006 were up 29 percent year on year at $3.828 billion. However the net loss (GAAP) for the quarter of $301 million, compares to a net income of $50 million in Q4, 2005.
Sun attributed $86 million of the loss to acquisitions - of StorageTek and SeeBeyond - and $228 million to restructuring charges.
Another $63 million was attributed to accounting changes related to SFAS 123R. There were other charges too, all of which add up to $577 million. Removing these from the equation produces a theoretical net income of $276 million.
It seems possible that CEO Jonathan Schwartz is trying to load up fiscal 2006 with as much bad news as possible, so that when he reports his first full fiscal year as CEO in 2007 the turnaround good news will be as dramatic as possible.
He said: "We're making excellent progress returning Sun to growth and profitability. Revenue, bookings and backlog are all up substantially - indicating we're gaining traction, market confidence and share."
Goldman Sachs analyst Laura Conigliaro said there was a 9-percent year on year growth in Sun's stand-alone storage business.
That business had not shown any significant growth for the previous seven quarters. The increase is put down to StorageTek.
Sun CEO Jonathan Schwartz said in his blog: "We grew our StorageTek business faster than their standalone history - which means we're seeing revenue synergies." It also indicates that Sun customers are buying StorageTek products.
It is far too soon to see if new Sun storage products will drive a further revenue growth as Sun hopes. Announcement momentum is continuing; a partnership with Greenplum has resulted in a data warehousing appliance based on the Thumper product, the X4500 server with radically increased disk storage.
This data warehouse appliance capitalises on the high data throughput and storage density of the Sun Fire X4500 x64 server with AMD Opteron processors, and Greenplum's parallel database architecture to boost performance acclaimed 10 to 50 times over existing systems.
Sun and Greenplum say it is capable of scanning 1 terabyte of data in 60 seconds and can easily scale to hundreds of terabytes of usable database capacity. They also state their data warehouse system is also one of the most energy efficient solutions in the industry, at only 90W per terabyte.
About 2,000 employees, half in the USA with 300 in Colorado, half outside it, were notified on Friday that their jobs were going. This is part of Sun's previously-announced cost-cutting measures. It's selling off a StorageTek facility in Colorado and closing down other facilities to save on real estate-related costs.
The first tranche of cuts were announced in June. These layoffs should be finishing in summer next year with 4,000 to 5,000 positions eliminated.
As employee and real estate-relate costs are being cut, storage sales growth and good news are both continuing.
Good tape news
Sun recently announced the 1000th delivery of its StorageTek StreamLine SL8500 tape library.
Other good news for Sun's tape portfolio included its StorageTek SL500 winning a 2006 Most Valuable Product award and an Editor's Choice award from the UK's Storage magazine. Gartner has also recently upgraded its rating of Sun Storage to "promising."
Another landmark was Sun's gear being used in the first 64-bit movie rendering farm. Nickelodeon Movies' computer-animated movie "Barnyard," distributed by Paramount Pictures, features complex computer-generated animation that used 64-bit Sun server and storage equipment.
Sun provided a 620-node server farm and storage solution, based on Sun Fire x64 servers powered by AMD Opteron processors, and 100-terabyte Sun StorageTek 3510 and 3511 FC arrays and a Sun StorageTek tape library for online storage and backup of shot files and other movie assets.
"Barnyard's" producers believe their Sun solution may represent the first time a studio has relied entirely upon 64-bit technology to render a full-length animated movie.
Still to come
The Honeycomb product has still not been announced, suggesting that it needs more work before it be turned into a revenue-generating product.
We are also still awaiting the resolution of its open systems (Windows and Unix) virtual tape problem caused by the cancellation of its VSM Open project.
Notwithstanding these problems a Forbes magazine article has suggested that Sun's recovery will be strikingly reminiscent of that exhibited by copier giant and document management company Xerox.
Copying the copier company
A UBS Investment Research report cites the recovery made by Xerox four to five years ago as a meaningful comparison for a probable Sun recovery.
The report states that both companies had incoming new CEOs who pursued cost-cutting strategies that were not wholly endorsed by analysts. Both companies have loyal customer bases, a good market share, solid cash flow potential, excessively high cost structures and hidden assets. Unlike Sun, Xerox had high levels of debt and had to deal with restating results.
So long as Sun is not caught up in the SEC's pursuit of companies infringing stock option grant rules then this restatement advantage should continue. Sun also has a better net cash position than Xerox then had and its revenue growth is stronger.
Sun cannot just rely on accelerated storage product sales from the existing StorageTek business. It has to generate post-acquisition product sales growth.
The Thumper product is the first real post-acquisition product with Honeycomb being the second. The company needs to make traction in the clustered and virtualised NAS market and fill its virtual tape product gap.
If it ticks these boxes and gains the savings it wants as well as accelerating StorageTek product growth further then storage revenue gains could be substantial.
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