Sun's Storage Rebounds

Sun, which swallowed StorageTek for $4.1 billion last year and has undergone a massive restructuring effort in recent months, showed the first signs of storage regrowth in its fourth-quarter results last night. (See Sun Gains Momentum and Sun Closes on StorageTek .)

The vendor, which posted total revenues of $3.83 billion, up 29 percent from the same period last year, comfortably beat analyst estimates of $3.61 billion. Sun attributed this revenue hike, in part, to the StorageTek acquisition. (See The Power of Two and Stomping With Sun.)

But the vendor posted a net loss for the quarter of $301 million, or $0.09 per share, down from a $50 million, or $0.01 per share, loss in the year-ago quarter. That figure dipped well below analyst estimates of a $0.03 loss.

Sun blamed its loss largely on the costs associated with its internal overhaul and recent acquisitions, which include both StorageTek and the $387 million deal for software specialist SeeBeyond. (See Sun Issues Growth Plan, Sun Takes Action Amidst Concerns, Sun to Buy SeeBeyond, and SeeBeyond Sucked Into Sun.)

"We have wasted no time in making some tough decisions," explained Jonathan Schwartz, who took over as CEO from Scott McNealy earlier this year, prompting mass layoffs and major personnel changes. (See Schwartz Shakes Up Sun, Sun's McNealy Steps Down, Sun Names Storage Boss, and Advice for Sun.) "I am pleased with our initial progress and the results we're announcing," he added.Despite the losses, Sun's storage business looks to be holding its own. Goldman Sachs analyst Laura Conigliaro, in a note today, identified 9 percent year-over-year growth in Sun's standalone storage business. This, she added, was particularly significant given that the vendor's storage business had been either flat or down for the seven prior quarters, "While we're not prepared to say that Sun's standalone storage business is out of the woods yet -- it does feel as if Sun is gaining at least a little more leveraging opportunity from the StorageTek acquisition," she stated.

Revenues from StorageTek were up in the mid-to-high single digits, according to Sun execs on last night's call, although the vendor did not break out specific figures. "We definitely saw, in Q4, some of the revenue synergies we anticipated when we announced the [StorageTek] acquisition," said Schwartz.

Another positive in last night's results, according to Conigliaro, was the fact that Sun avoided the quarter-end weakness that dogged its rivals IBM and EMC, ending the quarter with a $378 million deferred revenue increase over the previous quarter. (See IBM's Mixed Bag of Storage, EMC Reports Earnings, and EMC Reports Earnings.) "In stark contrast to IBM and EMC, Sun saw sales build into the end of June," Conigliaro explained, adding that some of the "softness" experienced by Sun's rivals may have been exacerbated by execution issues.

The firm's storage rebound is not totally unexpected. Last month, for example, analyst firm Gartner hinted that Sun was experiencing some healthy storage growth, buoyed by its StorageTek acquisition. (See Sun's Heating Up, and iSCSI Strides On.)

Certainly, Sun's storage business looks to be exploiting the vendor's existing partnerships and numerous "feet on the street" that were identified by Byte and Switch earlier this year. (See Will Sun Seize the Day?)Sun seems to be trying for momentum in storage. Today, the company took the wraps off a new Data Warehouse Appliance, based on its recently launched Sun Fire X4500 platform, code-named "Thumper." (See Sun, Greenplum Unveil App and Sun Thumps Storage-Server Hybrid.) According to the vendor, the new Data Warehouse Appliance can scan 1 Tbyte of data in 60 seconds and scale up to hundreds of Tbytes.

Described as a storage-server hybrid, the X4500 combines up to 24 Tbytes of SATA disk storage in a rackmounted system that packs two dual-core AMD Opteron "x64" processors. The result, Sun claims, is a device that combines the computing power of Sun's "Galaxy" high-performance servers with high-density storage in a 7-inch rackmount box.

The Data Warehouse Appliance, which is aimed at the telecom, financial services, retail, and Internet industries, will be available later this quarter in configurations of 10, 40, and 100 Tbytes. Pricing for the 40-Tbyte and 100-Tbyte versions starts at $15,000 per Tbyte, and pricing for the 10-Tbyte configuration starts at $25,000.

But, despite its recent storage activity, Sun is still playing its cards close to its chest on a yet-to-be-released storage product, code-named "Honeycomb," which the vendor described in early promotions as a storage device that can execute application code. (See Sun Signals Say 'Storage'.)

Sun also pulled the plug on its long-awaited Virtual Storage Manager (VSM) open tape management platform earlier this month and is now on the lookout for an alternative technology in that space as well. (See Sun Shuts Door on VSM Open, and StorageTek Users Voice Support Fears.)In trading today, shares of Sun rose 18 cents (4.4 percent) to $4.27.

James Rogers, Senior Editor, Byte and Switch