KKR Likes Sun Micro

For its second quarter, Sun said it made $126 million, or 3 cents a share, compared with a loss of $223 million, or 7 cents a share, a year ago.

Sun's net income included $58 million in stock-based compensation charges, $26 million in restructuring and related impairment of assets and a tax benefit of $4 million.

Revenue hit $3.57 billion, up from $3.34 billion in the year-ago quarter.

Analysts polled by Thomson First Call had expected the server and software firm to make a penny a share on sales of $3.52 billion. Analysts' EPS estimates weren't comparable.

Gross margin for the second quarter was 45.2%.

Looking ahead, CFO Mike Lehman said the March quarter will be "seasonally challenging" and he forecast a sequential decline in revenue of 3% to 5%, which represents a range of $3.39 billion to $3.46 billion.

Thomson First Call analysts polled expect Sun to post $3.32 billion in sales for the fiscal third quarter.

Gross margin will range from 42% to 44%, Lehman said.

The turnaround added to Monday's news that the company will begin using Intel's (INTC Quote) Xeon microprocessors in some if its servers and workstations.

The partnership with Intel will help boost Sun's Solaris operating system and its new line of servers featuring x86 chips. Intel said it will also provide research and development so Sun's software can easily run on Intel hardware and promote Solaris through its sales channels.