Updated from 4:24 p.m. ESTSun Microsystems ( SUNW) used cost-cutting and a currency benefit to help it swing to a profit in its second quarter even as sales dipped 1.6% to $2.84 billion, which was below what Wall Street had expected.
Sun shares fell 6.1% to $4.30 in the late-trading session after ending the regular session at $4.58. Chief Executive Scott McNealy claimed satisfaction in the profit and current business conditions. He also said the company is ready to start deploying its multi-billion-dollar cash bankroll. "You need to look at revenue, backlog, book-to-bill and deferred revenue all together," he said during a conference call after the bell Thursday. "That all points to a fairly stable demand picture. Things were quite linear coming out of the factory this past quarter, and that continues on into this quarter." The company reported second-quarter net income of $19 million, or 1 cent a share, on sales of $2.84 billion. During the same quarter last year, Sun lost $125 million, or 4 cents a share, on sales of $2.89 billion. Excluding charges, Sun earned $28 million, or 1 cent a share. Analysts had expected earnings excluding charges of 1 cent a share on sales of $2.93 billion, on average, according to Thomson First Call. Sun said a weak dollar during the second quarter provided a 3% favorable impact to its results vs. the same quarter last year and a 2% favorable impact from its fiscal first quarter. Sun said it grew unit volumes of its x64 and x86 servers and that it is "reestablishing relevance in key markets." Its product book-to-bill was 1.05 to 1, up from a ratio of 0.93 to 1 in the first quarter. Gross margin was 42.3%, up 2.5 percentage points from the previous quarter and up half a point from the second quarter last year.