As part of Sun Micro’s xVM portfolio, VirtualBox will have the support of Sun’s global development community, field resources and partners to make VirtualBox even more compelling to developers and end users, driving greater adoption across a broad set of communities.  This will also enable desktops or laptops to run Windows, Mac, Linus, or Solaris O/S side by side.

This is after Sun announced it would acquire MySQL last month.  Financial terms were not disclosed, although this is listed as "not material" to earnings.

• See our exclusive interview with Ed Walsh of VirtualIron, a virtualization competitor.

Citrix Systems (NASDAQ: CTXS) saw a brief rally after it acquired XenSource for virtualization and we all know how the hotter-than-hot VMware (NYSE: VMW) IPO brought virtualization front and center in the investment community.

Jon C. Ogg
February 12, 2008

It will assume the stock ticker "JAVA" on NASDAQ on Monday, August 27, 2007.  The company notes how it is mostly tied to the Java brand and platform.  But here is the problem: it costs next to nothing to license Java anymore.  Its main revenues come from actual product sales that it claims run teh Java deployments, but those servers and storage systems run everything else too.

Maybe they will try a reverse stock split next, or maybe keep issuing the statement "We are well positioned for the years ahead."  After that, they could see if the other listed company with the ticker "FREE" would sell them the ticker.  This is a yawn of an event at best.

Jon C. Ogg
August 23, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

What the company had going for it in general was cheaper component prices and a somewhat strengthening demand from corporate America for technology spending, but we’ll have to see if those are the reasons for the beat on EPS estimates.  Unfortunately, Sun Micro Systems has seen its shares roll over fairly hard since recent highs from earlier in the year.  Shares are way off the private equity investment highs from earlier this year and shares sold off 10% in recent days in a weak market.

In normal trading, Sun closed down 0.6% at $4.89.  Shares are actually up 9% at $5.31 in reaction in the after-hours trading session.  The chart on this one despite the after-hours pop is going to be hard to call with what looks a bit directionless no-man’s land patterns.

Jon C. Ogg
July 30, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Based on the company’s latest quarterly report, total headcount (as of 12/31/06) stood at 34,600, down from 38,300 in March of last year, a 9.5% reduction.  Only about half of the drop was related to the planned reductions, with the remainder due to regular attrition that was simply not replaced. 

But here’s the rub with Sun: while they eliminated $84 million from SG&A due to the smaller workforce, total SG&A expenses actually rose $54 million in the last two quarters of 2006.  Why?  Because compensation expenses for existing employees rose by $119 million.  It’s like we’re seeing some twisted form of stock dilution, only it’s being done with employees.  How much of the gain was from one-time charges is a question, but how much could it really be?

It’s been a year now since the StorageTek acquisition, they secured a $700 million investment in January from KKR, and Sun should have a clearer picture of what the product offering mix will be by now.  In line with this, the functions and knowledge base of every one of their thousands of consultants and sales reps should be evaluated much more.  These employees are some of the highest-paid in their industry, and because Sun is still trying to be a jack of all trades, there’s still way too many of these über-consultants on the payroll.  Now they are even looking at an internal revitalized SPARC initiative, and Wall Street isn’t impressed.

Revenue per employee for 2006 was just under $400,000 on a static basis.  It’s hard to compare this figure directly to one company, but one could argue that the product/service mix at Sun compares more to Hewlett-Packard ($600,000 per) than to an IBM ($250,000 per).  Until Sun shows a more meaningful portion of revenue coming from recurring revenue streams (a la IBM), their high gross margin products should give SUNW a goal of reaching the $600,000 mark.  But there’s still sweat aplenty for both management and shareholders as Sun tries to figure out what kind of company they want to be, and how to make money off the many ventures that are based on open-source initiatives.

Sun does have the saving grace of finally getting in the black last quarter, earning $110 million.  But operating margins are still light years away from the company’s stated long-term goal of 10%, and achieving $500 million in savings from the latest round of cuts seems like a hallucination. 

Sun may need to announce a much more aggressive cut – to the tune of 15-20% – to really get the attention of those who have been very disheartened at the 10% goal of last year.  We ran a break-up value analysis of Sun back in February, and we noted then that the story of SUNW going forward is going to be all about costs. 

Wall Street wants you to decide who you want to be, then set a firm & focused path to get there.  Bernstein downgraded the stock this morning, sending shares down about 2.8% to $5.84′ it still trades toward the upper end of their 52-week range of $3.74 – $6.78.  Sales growth is estimated to be about 8% for the current year and the street is only looking for 4.5% revenue growth next year. Estimates are wide for Fiscal 6/2007 and even wider for 2008, but for it to reach these goals the company sure looks like they are going to need to trim down employees in many units.  It should also look at potentially just eliminating less fruitful activities, but that’s another issue entirely.
Written by Ryan Barnes, edited by Jon Ogg
April 2, 2007

Ryan Barnes can be reached at ryanbarnes@247wallst.com; he does not own securities in the companies he covers.