Circuits Assembly Online Magazine - Sun Posts Weaker-than-Predicted Q3 Revenue

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SANTA CLARA, CA – Sun Microsystems Inc. has reported third-quarter net income of $67 million, compared with a loss in the third quarter last year of $217 million.

The Santa Clara-based company reported weaker-than-expected revenue of about $3.3 billion, up slightly from about $3.2 billion year-over-year. Total gross margin as a percent of revenues was 44.5%, an increase of 1.5%, compared with the third quarter of 2006.

Deutsche Bank Equity Research says Sun may get a lift from its recent advanced product line release, but expects x86 growth to slow further as customers wait for Sun's Intel-based x86 refresh later this summer. VMware-driven consolidation continues to pressure x86 demand, says the firm.

Deutsche Bank suggests more restructuring will be required for Sun to hit long-term margin targets. They believe it will prove difficult for Sun to grow into its existing cost structure because of the highly competitive nature of the server market.