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January 17, 1997updated 05 Sep 2016 12:56pm

SUN SAYS EVERYTHING IN THE GARDEN IS ROSY

By CBR Staff Writer

A couple of years ago, there were plenty of skeptics ready to ask whether Sun Microsystems Inc had a future, or indeed a purpose, but if there are any still to be found, they are having to keep their heads down very low indeed to avoid the jeers and rotten tomatoes from the company’s growing army of fans, who have plenty to cheer about in its fiscal second quarter figures. Our servers and power desktop systems are hot; customers need the superior scalability, reliability and performance of our products, declared a triumphant Scott McNealy, Sun’s chief executive officer. The company said its gross margin rose to 50.4% in its second fiscal quarter ended December 29, up more than five percentage points from the comparable period the previous year – and up there with the kinds of margins that stricken Apple Computer Inc once revelled in. McNealy warned analysts that it was difficult to say whether the strong gross margin was sustainable. I don’t know, he said. We don’t really manage for gross margin. McNealy later told Reuters that Sun has targeted its management incentives at revenue growth and earnings per share contribution, rather than gross margin. Still, the gross margin in the most recent quarter was the highest in at least a decade. We do have some very strong incentives for revenue growth at the top line. We don’t have any incentives for management compensation on gross margins, he said. Sun’s order backlog rose to $470m from $407m in its first quarter, but was still much less than the $522m backlog at the end of its 1996 fiscal year last June. But all over the industry, companies are turning their inventory much faster, so few are likely to start panicking yet. Chief Financial Officer Mike Lehman told analysts that the company was experiencing strong growth in its entire line of servers, including high end Enterprise 6000s.

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