Pacing Microsoft Corp in terms of raw volume, Sun Microsystems Inc also just failed to breach the six billion dollar barrier, but with a 26% increase in annual sales to $5,902m and profits soaring 81% to $356m, the company is not complaining. The solar growth was fuelled by the vast increase in interest in the Internet – most of those new Web sites being announced are on new computers, and many of them come from Sun, and also by strong demand from foreign markets. Demand was particularly strong in Europe, Korea, China, and other parts of Asia, said Sun chief financial officer Michael Lehman. He also noted growth in Sun’s mid-range and high-end servers as well as software products. US sales rose nearly 14% in the most recent quarter to $818.4m, or or 49.7% of net revenues, while European sales rose 17% to $437.5m. Gross margin percentages were at their highest for three years, at 44.2% of net sales in the quarter, up from 40.0% a year ago; gross margins in the 1995 third quarter were 43.2%, so the increase has been steady; operating profit was 10.9% of turnover for the fourth quarter, the highest level in more than seven years. Looking forward, we plan to continue growing the business by increasing our strategic investments in areas such as enterprise, mission-critical service and support, the UltraSparc microprocessor product line, and our family of products for the Internet, Lehman said. Chief executive Scott McNealy later had a chat with Reuters, saying he expects the first of the new line-up of products built around the company’s UltraSparc microprocessor to be available by year-end. McNealy said he expects the transition to be gradual, with customers holding on to their existing Sun machines for a while. We’re not expecting an immediate switch-over, he said, noting a full transition could take several quarters, if not years. An incremental product transition rather than an across-the-board one means they should see less demand falling off in front of the UltraSparc launch than there was with their SuperSparc, said an analyst who asked not to be named. It’s not like we’ve won but we sure feel like we’ve had a great year, said McNealy, who expects strong growth in the commercial enterprise market, driven by surging demand for large databases and groupware products like Notes.
Lot of excitement
Profits, at $1.26 a share, exceeded the consensus estimate of $1.22 a share, according to First Call’s survey of about 20 analysts, whose estimates ranged from $1.13 to $1.30. In his statement with the results, McNealy noted that In fiscal 1995, Sun’s revenues grew by more than $1.2 billion dollars. This is the first time in our company’s history that we’ve grown revenues by more than one billion dollars in a single year. He also highlighted the Internet and its works for special praise, noting that in May, at the SunWorld event in San Francisco, we enhanced our networking leadership and generated a lot of excitement with products such as Java, HotJava and Solstice SunScreen. The chief goes on Sun has created strong partnerships with software vendors and system integrators, improved our outstanding sales team, and invested big time in global customer service and support. We’ve clearly become the leading worldwide enterprise network computing company.
