Sun Micro Profit Tops Expectations; Shares Rally

High-end computer and software company Sun Microsystems posted a smaller-than-expected quarterly loss as a strong software and open storage business cushioned crumbling overall sales somewhat, sending its shares soaring after hours.

But the company, which like rivals Dell and EMC is struggling with diminishing global technology spending, posted an 11 percent decline in quarterly revenue and gross margins shrank to 41.9 percent from 48.5 percent a year ago.

Excluding restructuring and related impairment charges but including stock-based compensation and amortization charges, Sun posted a loss of 1 cent per share in the fiscal second quarter ended Dec. 28, versus a consensus loss of 9 cents, according to Reuters Estimates.

The company—which is shedding up to 6,000 jobs or 18 percent of its workforce—said it lost $209 million, or 28 cents a share for the quarter, compared with a $260 million profit, or 31 cents a share, a year ago.

The company had revenue of $3.22 billion, compared with $3.62 billion one year ago.

Sun Microsystems shares were up over 7 percent in after-hours trading at above $4, after closing at $3.99 on the Nasdaq.

Paul Sakuma / AP

The shares embarked on a steady downtrend from May, when the firm surprised investors with a quarterly net loss and the firm's stock lost favor with analysts.

Goldman Sachs had added Sun to its "sell'' list and cut its price target, saying the company's lack of a diversified portfolio put it at a competitive disadvantage.

Sun offers much of its software free in an open model, including a database and an office suite, seeking to foster its broad adoption. It sells service and hardware.

Like much of the industry, the firm is now struggling to slash costs as tech spending dissipates globally. It said in November it would cut 5,000 to 6,000 jobs, or 15 to 18 percent of its workforce, as part of a plan to save $700 million to $800 million a year.

Most of the Santa Clara, California-based company's competitors have similar plans. Sun competes against International Business Machines , Hewlett-Packard and Dell in the sale of server computer systems. It competes against EMC as a maker of data storage equipment.

Early this year, Sun acquired Q-Layer, a "cloud computing'' company that does off-site storage.

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