Sun's storage faring better than servers
Published: 15 May 2003 08:16 BST
Sun Microsystems has revealed for the first time the financial performance of its storage division, showing in a financial statement that revenue from those products declined more slowly in recent years than revenue from servers.
Sun's revenue dramatically declined when the manic spending of the Internet boom years ended in 2000, but storage revenue shrank slightly less than its most significant product line -- servers. In fiscal 2000, storage products accounted for $2.4bn, about £1.5bn, or 18 percent of the company's $13.4bn total product revenue. In fiscal 2002, the $1.7bn in storage revenue was 19 percent of the $9.1bn total product revenue, according to a quarterly reported filed on Wednesday with the Securities and Exchange Commission.
Sun has struggled over the years to capture more storage revenue from rivals such as EMC, acquiring a series of companies and signing a deal under which it sells Hitachi Data Systems' high-end product line.
Sun didn't break out details of its software revenue, a segment that's received more prominence with Sun's Orion plan to simplify software licensing by bundling numerous packages together. Spokesman Andy Lark said the company maintains its position that software is an inextricable part of hardware: "Software makes it work. It's not of much value with out the software."
Sun also said it's in negotiations to settle previously disclosed charges brought by the US Commerce Department that Sun violated export regulations -- charges that could mean monetary penalties and suspension of the company's export licence. The initial charges alleged Sun illegally sold equipment to Egypt in 1998 and to a Hong Kong reseller that sold equipment to China in 1999. But on 16 April the Commerce Department added more 19 charges to the list, the filing said.
Under the proposed settlement, Sun would pay a monetary fine and would have its export privileges under close scrutiny for one year. If during that year there are export rule violations, Sun would have its export privelages revoked, which could affect Sun's business materially. "We continue to believe we are reasonably likely to reach a negotiated resolution," Sun said in the filing.
In addition, Sun reported the effects that reporting stock-option compensation as an expense would have had on its most recent quarter. In April, Sun reported $4m in net income, but the stock-option expense would have cut $138m. Factoring in tax effects would have resulted in a net loss of $128m for the quarter.
"We don't agree with expensing of stock options," Lark said.
Sun also disclosed the costs of several recent acquisitions. Its July 2002 purchase of Afara Websystems, key to Sun's advanced "chip multithreading" microprocessor plans, cost $28m in stock. Sun's acquisition of Terraspring in November 2002, a crucial part of Sun's N1 advanced data center management plan, cost $30m in cash. And Sun's September 2002 acquisition of Pirus Networks, which now has become the centerpiece of the storage portion of N1, cost $167m in stock.
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