Sun Microsystems shares kept climbing Tuesday morning after a strong quarterly earnings report Monday. In an interview with CNBC, Chief Executive Jonathan Schwartz spoke about the the software and server firm's return to success.
"There is a variety of constraints in the [customers'] data centers -- power, real estate or just productivity of the assets -- and that's where we're innovating," Schwartz explained.
The CEO broke down revenue drivers by category: "Geographically, we're seeing the growth in Europe and Asia... From an industry perspective, in financial services, telecommunications and government."
Schwartz said the firm's "R&D is paying off," particularly the Solaris operating system. And as to mergers and acquisitions, he declared that, "We're definitely focused on being a consolidator in the marketplace."
Sun Microsystems shares rose Tuesday by as much as 31 cents, or 6.34 percent, trading at $5.20 on the Nasdaq. This followed Monday's after-hours gain of 12 percent.
Laura Conigliaro, an analyst at Goldman Sachs, said in a report that "The non-faint of heart should be buying Sun here."
"We expect strong margins to trump weak revenue and the stock to trade up," the report said.
Sun Microsystems, the world's third-largest maker of computer servers for businesses, said on Monday it swung to a quarterly profit from a year-earlier loss as it reduced costs, sending the shares higher.
Earnings of 9 cents per share beat the analysts' average estimate of 5 cents per share. Net income was $329 million in the fourth quarter ended June 30, compared with a year-earlier net loss of $301 million, or 9 cents per share.
Revenue rose slightly to $3.84 billion, matching analysts' estimates, from $3.83 billion, while operating expenses fell 25 percent to $1.49 billion.
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 and Intel , among other moves. The company last year announced about 5,000 job cuts to reduce costs.
Shares of Sun, which also sells workstations, software, storage and services, have fallen 9.2 percent this year, as of Friday's close.
They trade at 54 times expected 2007 earnings per share, a premium to competitors International Business Machines and Hewlett-Packard, which both sell at about 17 times expected earnings.