It's a mantra that Sun Microsystems
Well, shareholders aren't so sure anymore. In its second-quarter earnings news, Sun's stock was up only $0.02 to $3.87.
Last quarter, earnings fell roughly 85% to $121 million or $0.04 cents a share. Then again, last year's second quarter included Sun's massive legal settlement with Microsoft
Unfortunately, sales were weak, falling 4.2% to $2.98 billion. But Sun did indicate there was strength in its server shipments, which increased 7%. The company also logged a 118% sales increase in servers based on Advanced Micro Devices' Opteron chips. Sun hopes that these products' success will drive revenue to other Sun products designed to work well alongside them, but the company has had problems with this strategy.
Sales remain essentially weak, and Sun's competition -- Dell
Sun has been frantically trying to find a solution to its problems. One way is to cut costs, which it did once again. The company plans to cut an additional 1,000 jobs. Another strategy is a greater focus on software. But the enterprise software market is slowing and getting commoditized.
Yet Sun is spending its huge cash hoard on mega-acquisitions to pursue its strategy. So far, the acquisitions appear to be questionable. A few days ago, Fool contributor Melanie Hollands wrote an incisive analysis of Sun's acquisition of StorageTek. Problems Melanie discussed include possible customer defections and the relative maturity of the tape storage industry.
Recently, StorageTek landed HP as a customer for storage - a deal that accounts for roughly 3% to 4% of revenues. In light of the competition between HP and Sun in the server arena, might HP decide to go elsewhere?
For the past four years, Sun has been an unprofitable company. Sales have been gradually declining. And despite recent cost-cutting, operating expenses are still high. True, acquisitions will mean more revenue, but at what price?
In light of this future, why not just give the money back to shareholders as a dividend? Shareholders have waited four years for Sun to execute on a growth strategy -- isn't that enough time?
Fool contributor Tom Taulli does not own shares mentioned in this article.