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Sun Swings to Profit

In the recently ended fiscal first quarter, for instance, Sun said its 48.5% gross margin -- the best in seven years -- was helped by $25 million to $35 million in savings from cheap component prices.

The results illustrate Sun's ongoing predicament. The company has made progress in returning the business to profitability after struggling for years in the wake of the dot-com bust. But beyond cost-cutting and pricing benefits, investors are still waiting to see signs of a marked turnaround in its fundamental business.

In August, Sun announced that it was cutting its headcount by an undisclosed number , about a year after laying off 5,000 workers.

Sun said Monday it earned $89 million, or 3 cents a share, during the three months ended Sept. 30, in line with analysts' expectations. At this time last year, Sun posted a loss of $56 million, or 2 cents a share.

According to Sun, its quarterly profit included a restructuring charge of $113 million, or 3 cents a share.

The company said it experienced strong demand for its high-end server products as well as good growth in subscriptions for its identity-management software during the recently ended quarter.

Sun's computer system revenue was up 0.5% year over year, while its storage business revenue increased 2.9%.

Revenue from services was up a scant 0.7%.

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