Sun shipped 9% more computers last quarter, but revenue declined 4.3% to about $3.0 billion. Total product revenue declined 7.7% versus 2004. The company showed a profit of $121 million, but it happened due to tax bookkeeping. Sun also generated $22 million in free cash flow. However, it is spending $4.1 billion to buy Storage Technology Corp.'s tape and disk business, and is thus consuming cash.
The gerbil-on-a-treadmill metaphor is apt: 9% more units shipped for 7.7% less revenue is surely a doomed exercise in flying fur followed by a collapse in exhaustion. Sun is unlikely to ever see significant organic revenue growth again. The question is whether it can profitably keep its installed base happy while the business diminshes.
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