Sun's McNealy Steps Down

With Sun posting its solid quarterly sales growth in its recently completed fiscal third quarter, and having completed various transitions in its product lineup, McNealy said the time was right to hand over the reins.

Sun posted wider losses in its most recently completed quarter, but grew its top line by 21%.

The Santa Clara, Calif., computer company lost $217 million, or 6 cents a share, in the three months ended March 26, Sun said in press release Monday.

Sales were up 21% year over year to $3.18 billion, although they fell short of Wall Street expectations. Analysts polled by Thomson First Call were looking for Sun to generate $3.21 billion, with a loss of 6 cents a share.

At this time last year, Sun recorded a loss of $28 million, or 1 cent a share.

"We're growing again. Products are winning awards," said CEO Scott McNealy in a statement accompanying the financial results. "The next step is consistent profitability."

The company credited the revenue growth to recent acquisitions of StorageTek and SeeBeyond, as well as growth in Sun's traditional products. According to the company, it was the first quarter in nearly two years that Sun's business excluding recent acquisitions had experienced sequential revenue growth for both storage and servers.

Sun increased revenue in all its geographies during the quarter, with U.S. sales increasing 12% year over year on strength in the telecommunications and energy sectors.

Computer systems revenue totaled $1.47 billion up 6% year over year. And the company generated $197 million in cash from operations.

Sun's fiscal third-quarter loss included $87 million related to intangible asset amortization associated with recent acquisitions, $57 million in stock-option expenses and $36 million in restructuring charges.

The company's gross margin increased to 43% during the quarter, compared with 41.4% in the year-ago period.