Sun Slows Losses Thanks to Strong Storage Sales

Sun Microsystems (NASDAQ: JAVA) fared better than expected in the sharp fourth-quarter economic slowdown, cutting its cash burn by more than half as its open storage efforts continued to gain traction (see Sun May Surprise Its Critics and Can Sun Rise on Open Source Storage?).

The results were good news for the company, which faced a raft of downbeat analyst and media coverage following a $1.5 billion write-down in the October quarter. Sun shares were up 10% in morning trading today.

Sun’s sales of $3.22 billion were down 11 percent from the year-ago quarter, but better than the $3.16 billion that Wall Street analysts expected. The company cut its cash burn by more than half, with cash levels decreasing by $113 million in the quarter, down from $242 million in the October quarter. Sun ended the year with just over $3 billion in cash and investments and $1.26 billion in debt. About $550 million of that debt will come due in August.

With $700 million to $800 million in annual savings expected to kick in later this year, Sun’s cash position should continue to improve, although other IT vendors have said that the first half of the year could be rocky (see EMC Braces for Tough Storage Market).

Open Storage sales were a bright spot for the company, growing 21 percent in the quarter to reach a $100 million annual run rate, on the strength of the new Sun Storage 7000 product family, codenamed “Amber Road.”

While still just a fraction of the company’s overall sales, CEO Jonathan Schwartz said the company has “high expectations going forward” for its Open Storage efforts.

“This is the first of what will be a complete line of open storage-based products, covering the smallest customers all the way up to mainframe storage,” he said on the company’s earnings call.

Schwartz said Amber Road has generated “tremendous customer and partner interest,” with 2,000 channel partners signed on.

The data storage systems, which use flash-based solid state drives (SSDs) and Sun’s open source ZFS file system, offer “massive price-performance benefits against proprietary NAS vendors,” Schwartz claimed.

Other growth areas for Sun in the quarter included Solaris-based Chip Multi-Threading systems, Total Software and X64 servers.

“In the midst of this economic downturn, discussions about free and open source software have substantially heated up,” Schwartz told analysts on the call.

Paul Shread is managing editor of Enterprise Storage Forum and covers technology stocks for Internet News.