Sun Micro posts 4th-qtr profit as costs drop

By Philipp Gollner

SAN FRANCISCO (Reuters) - High-end computer maker Sun Microsystems Inc. SUNW.O said on Monday it swung to a quarterly profit from a year-earlier loss as it reduced costs, sending the shares up 10 percent.

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 percent, topping its earlier goal of at least 4 percent.

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 Inc. (AMD.N) and Intel Corp. (INTC.O), among other moves. The company last year announced about 5,000 job cuts to reduce costs.

Net income was $329 million, or 9 cents per share, in the fourth quarter ended June 30, compared with a year-earlier net loss of $301 million, or 9 cents per share. The profit beat analysts' average estimate of 5 cents 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 percent to $1.49 billion.

The fourth-quarter profit margin "marks significant progress toward our longer-term growth plan" of at least 10 percent operating margin for the 2009 fiscal year, Chief Executive 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 percent in the fourth quarter of 2008.