After years of losses, Sun Microsystems returned to profitability in the last quarter, while Advanced Micro Devices (AMD) swung to a loss, providing evidence that the road to recovery in the technology industry is a bumpy one.
"It's great to be profitable again," Jonathan Schwartz, chief executive of Sun, whose string of losses had once led analysts to question the company's ability to survive, told analysts in a conference call. "Sun's financial performance this quarter demonstrates that our strategy and discipline are paying off."
In contrast, Advanced Micro Devices, the computer chip maker, reported a US$574 million loss, in contrast to a US$96 million profit in the quarter a year earlier. Ten days ago, it warned investors that lower prices had hurt its bottom line, a result of a bruising price war with its larger rival, Intel.
On Monday, Intel announced a deal to become a second outside supplier of server chips to Sun, entering territory that AMD had long claimed for itself. Sun also announced on Tuesday that the private equity firm Kohlberg Kravis Roberts & Co would make a US$700 million investment in the company in the form of convertible senior notes.
Sun's net income for the quarter, the second of its fiscal year, was US$126 million, or US$0.03 a share, in contrast to a net loss of US$223 million, or US$0.07 a share, for the period last year. The latest result beat analysts' forecasts.
Revenue was US$3.6 billion, an increase of 7 percent over the US$3.3 billion reported for the second quarter last year. Sun attributed the growth to server sales, as well as strong acceptance of Solaris, Sun's computer operating system. Revenue in Sun's computer systems products unit increased 14 percent, the fourth consecutive quarter of year-over-year revenue growth, the company said.
Sun's net income for the second quarter included US$58 million of stock-based compensation charges, US$26 million of restructuring and related charges and a tax benefit of US$4 million. The impact of these three items was a loss of about US$0.02 a share.
Shares of Sun rose as much as 8 percent, or US$0.46, to US$6.12 in late trading after the report was issued, after declining US$0.09, to US$5.66, during regular trading.
"It's an important milestone," said Brent Bracelin, an analyst at Pacific Crest Securities. "They are well on their way to executing a turnaround." Bracelin said that the challenge now would be for Sun to keep costs down as it headed aggressively into volume markets, where profit margins were lower.
While the Sun-Intel deal announced on Monday had no impact during the December quarter, it serves as an illustration of AMD's precarious position as it tries to hold on to the market share gains of the past year.
AMD has spent several quarters embroiled in a fierce price war with Intel in an effort to gain market share, particularly as Intel introduced its new line of high-performance chips.
AMD said shipments of its server processors, which have the highest profit margins, were essentially flat with the previous quarter, while the average selling prices for those chips were down significantly. The company said, however, that overall microprocessor shipments increased 26 percent.
AMD, based in Sunnyvale, California, posted a net loss of US$574 million, or US$1.08 a share, for the quarter, the fourth of its fiscal year. For the same quarter last year, AMD earned US$96 million, or US$0.21 a share. Revenue for the quarter was US$1.77 billion, compared with US$1.84 billion at the same time last year.
In addition to the price war with Intel, AMD also attributed its lower profit to heavy costs associated with its US$5.4 billion acquisition of ATI Technologies, the graphics chip maker it acquired in October. Excluding those costs, as well as employee stock-based compensation expenses, AMD reported fourth-quarter revenue of US$1.37 billion, compared with US$1.35 billion last year.
Shares of AMD declined as much as 5 percent in after-hours trading after release of its earnings report; they declined US$0.02, to close at US$17.51, in regular trading. AMD's warning on Jan. 12 sent its shares down US$1.91, or 9 percent, to US$18.27, and led several Wall Street investment firms to lower their ratings of AMD.
Hector Ruiz, AMD's chief executive, said he expected the price war with Intel to continue.
"Pricing is very, very challenging and we expect it to be for all of the year," Ruiz told analysts.
ROLLER-COASTER RIDE: More than five earthquakes ranging from magnitude 4.4 to 5.5 on the Richter scale shook eastern Taiwan in rapid succession yesterday afternoon Back-to-back weather fronts are forecast to hit Taiwan this week, resulting in rain across the nation in the coming days, the Central Weather Administration said yesterday, as it also warned residents in mountainous regions to be wary of landslides and rockfalls. As the first front approached, sporadic rainfall began in central and northern parts of Taiwan yesterday, the agency said, adding that rain is forecast to intensify in those regions today, while brief showers would also affect other parts of the nation. A second weather system is forecast to arrive on Thursday, bringing additional rain to the whole nation until Sunday, it
CONDITIONAL: The PRC imposes secret requirements that the funding it provides cannot be spent in states with diplomatic relations with Taiwan, Emma Reilly said China has been bribing UN officials to obtain “special benefits” and to block funding from countries that have diplomatic ties with Taiwan, a former UN employee told the British House of Commons on Tuesday. At a House of Commons Foreign Affairs Committee hearing into “international relations within the multilateral system,” former Office of the UN High Commissioner for Human Rights (OHCHR) employee Emma Reilly said in a written statement that “Beijing paid bribes to the two successive Presidents of the [UN] General Assembly” during the two-year negotiation of the Sustainable Development Goals. Another way China exercises influence within the UN Secretariat is
LANDSLIDES POSSIBLE: The agency advised the public to avoid visiting mountainous regions due to more expected aftershocks and rainfall from a series of weather fronts A series of earthquakes over the past few days were likely aftershocks of the April 3 earthquake in Hualien County, with further aftershocks to be expected for up to a year, the Central Weather Administration (CWA) said yesterday. Based on the nation’s experience after the quake on Sept. 21, 1999, more aftershocks are possible over the next six months to a year, the agency said. A total of 103 earthquakes of magnitude 4 on the local magnitude scale or higher hit Hualien County from 5:08pm on Monday to 10:27am yesterday, with 27 of them exceeding magnitude 5. They included two, of magnitude
Taiwan’s first drag queen to compete on the internationally acclaimed RuPaul’s Drag Race, Nymphia Wind (妮妃雅), was on Friday crowned the “Next Drag Superstar.” Dressed in a sparkling banana dress, Nymphia Wind swept onto the stage for the final, and stole the show. “Taiwan this is for you,” she said right after show host RuPaul announced her as the winner. “To those who feel like they don’t belong, just remember to live fearlessly and to live their truth,” she said on stage. One of the frontrunners for the past 15 episodes, the 28-year-old breezed through to the final after weeks of showcasing her unique