Is Sun Rising?

Is there light at the end of the tunnel? According to a report from researcher IDC, Sun Microsystems (Nasdaq: SUNW  ) was the only one (of the top four global server vendors) to experience year-over-year revenue growth during the second quarter ended in June.

Frankly, the numbers for the entire server market are startling:

Vendor

Q2 2006 revenue

Q2 2005 revenue

YOY growth

IBM (NYSE: IBM  )

$3,808

$3,893

(2.2%)

Hewlett-Packard (NYSE: HPQ  )

$3,420

$3,480

(1.7%)

Sun Microsystems

$1,585

$1,372

15.5%

Dell (Nasdaq: DELL  )

$1,269

$1,286

(1.3%)

Source: IDC; numbers in millions

I mean, wow. What happened? Opteron, that's what. Sun adopted Advanced Micro Devices' (NYSE: AMD  ) speedy server chip more than two years ago, and it appears to be paying dividends at Dell's expense in the high-growth x86 -- or Intel-compatible -- segment of the market.

IDC explains in its press release, "HP and Sun were the only top five server vendors to outgrow the market in Q2 2006 -- growing [sales] 3.6% and 48% respectively -- and gaining x86 market share in the process." In other words, Sun's products are selling very well.

Dell, for its part, saw both revenue and market share decline. IDC now says the ailing computer maker accounts for 10.3% of global server revenue, 2.6 percentage points behind Sun. Can that gap widen? Yes, but only if Sun figures out how to stay different. That won't be easy if Dell extends its relationship with AMD to include Opteron chips in its volume servers. ("Volume server" is a term typically used to describe a computer with fewer than four processors.)

There's also the chance that long-standing Dell partner Intel (Nasdaq: INTC  ) will see its newer server chips gain traction, which could hurt Sun and aid Dell. But I count that as a long shot, since Sun is also an Intel partner.

Nevertheless, Sun still isn't making money and isn't expected to record a profitable year before June of 2008. That's two years -- an eternity in the tech business, and more than enough time for today's brightly shining Sun to be swallowed by a Dell-sized eclipse.

Let us shed light on related Foolishness for you:

Dell and Intel are Motley Fool Inside Value selections. Ask us for anall-access passto the service and you'll be privy to chief advisor Philip Durell's best picks, which collectively are beating the market by more than 2%. You'll also receive instructive lessons on valuation and company analysis. Give Inside Value a try; it's free for 30 days.

Fool contributorTim Beyersworked at Sun in the late '90s. You'll have to forgive him if he's rooting for a comeback. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. Get the skinny on all the stocks in Tim's portfolio by checking his Foolprofile. The Motley Fool'sdisclosure policyis always on the up-and-up.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 515579, ~/Articles/ArticleHandler.aspx, 8/30/2014 8:22:03 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement