Financial Update: Compaq Posts Net Profit. Sun Leaps Past Estimates With Record Revenue. SGI Reports Fourth Quarter Results.

July 28, 2000

SHORT TAKES

COMPAQ POSTS NET PROFIT, SALES RISE

New York, N.Y. — Compaq Computer Corp. posted a second-quarter net profit versus a loss last year, meeting Wall Street expectations on strong sales of notebook computers and powerful Intel-based computers used to run Web sites. The Houston-based company also returned its commercial personal computer sales unit to profitability ahead of schedule, and said it expects higher sales growth for the rest of the year. The company reported net income of $387 million, or 22 cents per share, compared with a loss of $184 million, or 10 cents, in the year-earlier quarter. Revenues rose 8 percent to $10.1 billion. Excluding $25 million in investment gains, earnings per diluted share were 21 cents in the 2000 second quarter. Wall Street analysts on average had expected the company to earn 21 cents per share, according to First Call/Thomson Financial, which compiles brokerage estimates. “We are pleased with our progress to date,” Michael Capellas said in a statement. “Industry standard revenue grew by 40 percent…while our commercial PC business returned to profitability an hour ahead of time.” Shares were trading on Instinet at 28 after the earnings report, which came after the close. The shares had closed 11/16 higher at 27-7/16 on the New York Stock Exchange. The share price has stayed in a trading range in the 20s in recent months. “It was a mixed quarter,” said Gerard Klauer Mattison analyst David Bailey, saying the company did not perform well in storage and services, both considered quickly expanding markets with the explosion of business on the Web.

“IBM and Hewlett-Packard Co. articulated an e-commerce strategy over a year ago, and Compaq has just started to align themselves with an e-commerce strategy in services,” he said. Capellas said he expected a stronger second half, meeting financial targets set for the third and fourth quarters. “We expect to deliver strong, double-digit revenue growth in the second half of the year,” Capellas said. In a telephone interview, he said the company is looking to more aggressively protect its position as the world’s largest provider of personal computers against Dell Computer Corp., which last year took the lead in the U.S. market, and has been gaining on Compaq in global sales. “We said we would get our business model in line to achieve profitability at the expense of market share, and now that we have done that you will see us get a lot more aggressive on share,” he said.

SUN LEAPS PAST ESTIMATES WITH RECORD REVENUE

San Diego, CA — Stephen Shankland reports that Sun Microsystems vaulted over analyst estimates for its most recent quarter, reporting a record revenue of $5 billion. That represents a growth of 42 percent over the same quarter last year when revenue passed $3.5 billion. The company’s net income for the quarter grew 67 percent to $660 million, or 39 cents per share, well over the 33 cents estimated by analysts polled by First Call/Thomson Financial. A year ago, the company had split-adjusted earnings of 24 cents per share, with net income of $395 million. “I think the numbers are breathtaking,” said SG Cowen analyst Richard Chu. Other analysts called it “superlative,” “unbelievable” and “stunning.”

Strong server growth led the company. Sun shipped more than 100,000 servers in the quarter, including 500 top-end E10000 “Starfire” servers that typically cost more than $1 million, chief operating officer Ed Zander said. That’s about a fifth of the total 2,500 that have sold over the history of the product. Sun chief executive Scott McNealy gloated over the numbers. “In every important metric, including market share gains, we had an incredible quarter,” he said in a statement. Pointing to Sun’s vision for the future, he added, “Our belief is that everything with a digital or electronic heartbeat will one day be connected to the Internet and often to Sun servers.” Chief financial officer Mike Lehman said Sun saw growth in “virtually all the important markets, including telecommunications, financial services, retail and manufacturing.” And there’s more to come. For the current fiscal year, Sun upped its projections for annual revenue growth, moving from the previous advice of growth in the “strong 25 percent” range to “pushing 30,” Lehman said in a conference call today. “Compared to our view three months ago, we are raising our expectations for the current fiscal year,” he said.

SGI REPORTS FOURTH QUARTER RESULTS

Mountain View, CA — SGI announced results for its fourth quarter. Revenue for the fourth quarter was $534 million, a 36% decrease from the previous year, which included results from the Cray business unit. The company reported an operating loss of $59 million compared with operating income of $35 million in the same quarter a year ago. The net loss for the fourth quarter was $608 million, or $3.27 per share, compared with net income of $158 million, or $0.81 per share, in the same quarter a year ago. The operating loss includes charges of approximately $27 million related to reserves taken on certain spare parts and inventories. As previously indicated, the income tax provision includes a $415 million deferred tax asset valuation allowance necessitated by the distribution of SGI’s shares in MIPS Technologies, as well as approximately $85 million in residual U.S. tax which reflects the possibility the company may repatriate accumulated foreign earnings. “As we stated in our announcement of July eleventh, supply constraints on the desktop products, multiple product transitions and the imminent release of the third generation NUMA product family reduced fourth quarter revenue levels,” said Bob Bishop, chairman and chief executive officer. “In addition, reserves related to our spare parts and inventory reduced our gross margin for the quarter.”

“We are pleased however, that our bookings grew quarter to quarter by 31% and that we have already generated backlog of over $100 million for the third generation NUMA product family. This product family continues to be enthusiastically accepted by key customers, as have our other recently introduced products, including the Octane2 and the IA32 desktop/server family.” Revenue for fiscal year 2000 was $2.3 billion compared with $2.7 billion a year ago. Net loss for the year was $830 million, or $4.52 per share, compared with net income of $54 million, or $0.28 per share a year ago. The net loss for fiscal year 2000 includes $103 million in pre-tax restructuring charges as well as the income tax effects described above. Cash, cash equivalents and marketable investments were $384 million at June 30, 2000, as compared to $512 million at March 31, 2000. The $512 million included $78 million of MIPS cash which is no longer included in SGI’s consolidated balance sheet. The Company’s consolidated backlog at June 30, 2000 was $298 million. All earnings per share amounts represent diluted earnings per share as defined in Statement of Financial Accounting Standards No. 128.

HONEYWELL EARNINGS RISE 14 PERCENT

Morris Township, N.J. — Second-quarter net income at Honeywell International Inc. rose 14 percent, meeting analysts’ reduced expectations. For the three months ended June 30, Honeywell earned $617 million, or 76 cents a share, versus $540 million, or 67 cents per share, in the year-ago period. Excluding one-time items in both quarters, Honeywell earned 75 cents per share, meeting the reduced expectations of analysts surveyed by First Call/Thomson Financial. Honeywell said last month it expected to earn 73 cents to 77 cents a share for the quarter because of unexpected parts shortages in its aerospace unit, higher raw material prices and higher interest rates. Analysts had been expecting the Morris Township-based manufacturer to earn 78 cents per share. On Tuesday, shares of Honeywell fell 18.8 cents to close at $36.875 on the New York Stock Exchange, remaining well off the company’s 52-week high of $68. The manufacturing giant, formed by the merger of Honeywell and AlliedSignal in December, said sales were $6.31 billion, up 6 percent from $5.96 billion in the year-ago period.

Honeywell said its recently acquired Pittway burglar and fire alarm business, aerospace aftermarket, turbochargers, electronic materials, fluorines, and sensing and control products led sales growth. The growth was partially offset by lower sales in industrial automation and control, truck brakes, friction materials, and in aerospace electronics, which Honeywell attributed to a temporary shortage of parts from suppliers. Last week, Honeywell said it plans to eliminate 6,000 of its 120,000 jobs worldwide within the next year to cut costs. It also said it would merge its polymers and specialty chemicals businesses and close a semiconductor chip packaging plant in California to streamline underperforming units. In the six months ended June 30, Honeywell earned $1.12 billion on revenue of $12.35 billion. In the year-ago period, Honeywell earned $980 million on revenue of $11.5 billion. Visit http://www.honeywell.com for more information.

TI SHARES RISE AHEAD OF REPORT

New York, N.Y. — Shares of Texas Instruments Inc., a leading maker of computer chips for wireless communications, rose more than 6 percent on Monday, recouping some recent losses ahead of the company’s second-quarter earnings report. The shares were up 4 to 66-1/2 in heavy morning trade, making it one of the top net gainers on the New York Stock Exchange. The stock stood as high as 87-1/4 on June 21. Texas Instruments (TI) is expected to report second-quarter results after the stock market close.

Merrill Lynch analyst Joe Osha on Monday reiterated his intermediate-term and long-term “buy” ratings on TI, citing the company’s strong position in the market for digital signal processors (DSPs), which convert sounds into digital form. TI has the lead in the technology to create new kinds of mobile phones – third-generation, or 3G, phones – that will be designed for Internet access and data transmission, Osha said. The analyst shrugged off concern about partnerships for DSPs between TI rivals Analog Devices Inc. and Intel Corp., and between Lucent Technologies Inc. and Motorola Inc. “We know of no other competitor that offers handset makers a roadmap to high-bandwidth 3G devices that is as compelling as TI’s,” Osha wrote in a note to clients. “The competitive threat from the ADI/Intel tie-up has yet to materialize, and although the Lucent/Motorola Starcore is a strong architecture, uptake of that product is still limited.” Osha said in a telephone interview that TI was one of the chip makers recovering from a sell-off last week. The Philadelphia Stock Exchange semiconductor index fell nearly 184 points last week to finish at 1082.51.

NORTEL PUMPS $1.9 BILLION IN FIBER

San Diego, CA — Nortel Networks Corp. unveiled a $1.9 billion investment to more than double its fiber-optic manufacturing capacity, just as a source said it was in high-stake talks with Corning Inc. to sell the fiber-optic parts piece of its business. The massive investment by Nortel, the world’s No. 2 network equipment supplier, will add 9,600 jobs over the next 18 months. The company has already spent $660 million over the past nine months in a similar push to boost production. Explosive traffic growth on the Internet is fueling tremendous demand for fiber-optic network systems that Nortel and rivals such as Lucent Technologies Inc. produce. Those systems can handle greater volumes of voice, data and image information than traditional networks.

Fiber-optic components, critical equipment used in the those networks, includes such devices as pumps, lasers and filters that help push large volumes of data and boost capacity. Nortel said it will spend $1.2 billion to increase the production of fiber-optics components, a unit that it is in talks to sell, a source close to the deal told Reuters. The investment will increase manufacturing capacity by 3.5 times in North America, Britain and Australia. Nortel estimated on Monday that its fiber-optic parts unit will record revenues of about $2.5 billion in 2000, up 200 percent from 1999. The remainder of Nortel’s investment, $700 million, is earmarked for optical network systems. “Maybe they just want to say ‘Hey this isn’t slipping – this is not a fire sale’,” said Michael Neiberg, analyst at Chase, Hambrecht & Quist on the timing of the announcement. It is not surprising the two companies are in talks, he added, because they have been working together closely for at least six months preparing joint bids to build large networks.

LUCENT TO BUY SPRING TIDE

New York, N.Y. — Aiming to expand its lineup of data networking products and stay abreast of Cisco , Lucent said that it planned to acquire Spring Tide Networks, a private maker of network switching equipment, in a stock transaction valued at $1.3 billion. Under the terms of the deal, which would boost Lucent’s Internet-related networking products, the Murray Hill, N.J.-based company will issue about 26.8 million shares and options – a package valued at more than $1.3 billion, based on Lucent’s July 24 closing price of $50.13. The valuation excludes the 4 percent stake in Spring Tide that Lucent already owns. Shares of Lucent were down 1 1/8, or 2 percent, to 49 1/8 in early Tuesday trading after reaching a 52-week low of 49.

Spring Tide, based in Maynard, Mass., develops devices that allow companies to offer Internet Protocol services – such as virtual private networks, managed firewalls, voice and multimedia services – across any kind of network connection, whether wireless, broadband DSL or cable or traditional wireline. Spring Tide’s flagship product, the IP Service Switch 5000, can route tens of thousands of users simultaneously. Lucent said Spring Tide’s equipment delivers up to four times the scalability and performance of competing products. Since entering a manufacturing agreement with Spring Tide in December 1999, Lucent has secured contracts for the IP Service Switch 5000 with several customers, including AT&T Wireless and ionex telecommunications. “Businesses are increasingly turning to broadband service providers to provide IP services rather than managing them on their own internal corporate networks,” said Janet Davidson, president of Lucent Technologies InterNetworking Systems, in a statement. Spring Tide will become part of Lucent’s InterNetworking Systems Group. Lucent said the IP Service Switch 5000 complements Lucent’s portfolio of data networking products. The company cited estimates by analyst firm Ryan Hankin Kent saying that the current $660 million IP services equipment market will increase to $1.6 billion in a year and exceed $5 billion by 2003.

VIXEL CORP. ANNOUNCES FINANCIAL RESULTS

Bothell, WASH. — Vixel Corporation announced its financial results for the second quarter ended July 2, 2000. Storage Area Network (SAN) systems revenue increased to $7.0 million from $5.9 million in the first quarter of 2000. For the second quarter, SAN systems comprised 89.8% of total revenue compared with 56.3% of total revenue in the year ago quarter. As anticipated, component revenue decreased in the second quarter to $0.8 million from $1.9 million in the first quarter of 2000. These financial results demonstrate Vixel’s success in transitioning revenue towards SAN systems products. Total revenue for the second quarter was $7.8 million, which compares to $11.5 million in the second quarter of 1999 and to $7.8 million in the first quarter of 2000. For the first half of 2000, SAN systems revenue increased to $12.9 million or 82.8% of total revenue compared with $10.8 million or 49.0% of total revenue in the first half of 1999. Total revenue for the first half of 2000 was $15.6 million compared with revenue of $22.1 million for the first half of 1999.

Gross margins for the second quarter of 2000 increased to 32.1% of total revenue compared with 28.6% of total revenue in the first quarter of 2000 and 29.4% of total revenue in the second quarter of 1999. Adjusted net loss for the second quarter of 2000, which excludes the effects of stock-based compensation and amortization of goodwill and intangibles, was $5.1 million or $0.23 per share, compared with an adjusted net loss of $3.8 million or $0.23 per share in the second quarter of 1999, and an adjusted net loss of $4.6 million or $0.21 per share in the first quarter of 2000. Actual net loss for the second quarter of 2000, including the effects of stock-based compensation and amortization of goodwill and intangibles, was $6.3 million or $0.28 per share, compared with a net loss of $5.8 million or $0.35 per share in the second quarter of 1999, and $6.3 million or $0.28 per share in the first quarter of 2000. Adjusted net loss for the first half of 2000 was $9.7 million, or $0.43 per share, compared with an adjusted net loss of $7.4 million, or $0.46 per share for the first half of 1999. Actual net loss for the first half of 2000 was $12.6 million, or $0.56 per share, compared with a net loss of $9.9 million, or $0.61 per share for the first half of 1999.

QUANTUM’S DSSG ANNOUNCES FISCAL Q1 NET INCOME

Milpitas, CA — Quantum Corporation’s DLT & Storage Systems Group announced first quarter net income for fiscal year 2001, ended July 2, 2000, of $44 million, or $.28 per share, diluted. Revenue for the quarter was $366 million, an increase of 11 percent over the year earlier period. Fiscal Q1 revenue for the company’s Storage Solutions business reached $100 million for the first time ever and represented a record 27 percent of total DSSG sales. On a year-over-year basis, Storage Solutions revenue grew 50 percent. Products offered by this business include Quantum’s Snap! Server line of network attached storage (NAS) appliances and the ATL line of enterprise storage solutions.

For the DLTtape business, combined revenues from drives, media and media royalty in fiscal Q1 were $293 million. DLTtape media revenue continued to contribute significantly to overall DSSG profitability and to the $50 million in cash from operations generated by the business during the quarter. “We’re very pleased with the consistently strong profitability of DSSG,” said Michael Brown, Quantum chairman and CEO. “We’re also enthused about the accelerating growth that’s occurring in our Storage Solutions business. Revenues for ATL products and Snap Server appliances reached new records in fiscal Q1, driven by record unit shipments of Snap Servers and ATL enterprise-class tape automation systems. This business is clearly benefiting from the phenomenal growth of both the SAN and NAS storage markets which, ultimately, are growing in response to the expansion of network computing and global internet usage.” For the quarter ended July 2, 2000, consolidated net income for Quantum Corporation was $60.4 million.

SCO ANNOUNCES THIRD QUARTER RESULTS

Santa Cruz, CA — SCO announced its third fiscal quarter financial results for the period ended June 30, 2000. For the third fiscal quarter of 2000, revenues were $26,931,000, compared with $57,060,000 for the third fiscal quarter of 1999. Net loss for the quarter was $19,240,000, or $0.54 per share, compared with a net profit of $4,535,000, or $0.13 per share, basic and diluted, recorded in the same period of 1999. Revenues for the nine-month period ending June 30, 2000, were $116,126,000, compared with $165,504,000 for the same nine-month period in fiscal 1999. Net loss for this nine-month period was $36,174,000, or $1.02 per share, basic and diluted, compared with a profit of $11,483,000, or $0.33 per share, basic and $0.32 per share, diluted for the first nine months of 1999.

Starting in the second fiscal quarter of this year, SCO re-aligned into three product divisions. During the third quarter, The Server Software Division, which reported revenues of $24,757,000 and a net loss of $8,510,000, released its next version of UnixWare 7 NonStop Clusters product, making the high-end technology affordable to businesses of all sizes. Oracle8i database was certified on the UnixWare 7 NonStop Clusters platform. Additionally, expense reductions from the consolidation of server R&D facilities were completed during this quarter, as planned. The Tarantella Division reported third fiscal quarter revenues of $2,528,000 and a net loss of $8,538,000. During the quarter, the newly formed division landed important new enterprise account wins, including Shell Services International, DaimlerChrysler Aerospace SA and Consolidated Freightways. The division also began shipments of both Tarantella Express for Linux and Tarantella Enterprise II ASP Edition products. Additionally, the division announced a strategic ASP-product alliance with Nortel Networks, who will include Tarantella web-enabling software in their new Preside Managed Application Services Platform. The Tarantella Division and Caldera Systems announced the first bundling of Tarantella in the Linux space, Caldera OpenLinux Application Server with Tarantella, which is available immediately. Visit http://www.sco.com for more information.

INPRISE/BORLAND ANNOUNCES SECOND QUARTER RESULTS

Scotts Valley, CA — Inprise/Borland announced financial results for the second quarter of fiscal year 2000. For the second quarter, revenues were $46.7 million, up from $40.2 million in the same period a year ago, an increase of 16 percent. Excluding merger costs, the Company recorded net income of $4.0 million, or $0.06 per share. This compares to a loss of $9.5 million or $0.18 per share in the prior year, excluding the impact of the nonrecurring gain from the Microsoft cross license of $105.1 million. Cash, cash equivalents and short-term investments as of June 30, 2000 were $243.9 million, up from $197.7 million at December 31, 1999. The increase in cash was due to cost containment efforts and the sale of the Scotts Valley campus in March of this year. Cash, cash equivalents and short-term investments increased during the current quarter by $4.2 million as compared to March 31, 2000.

“We continue to make progress achieving our financial objectives, particularly in the operations area,” said Fred Ball, Inprise/Borland’s senior vice president and chief financial officer. “Going forward we are planning to reinvest a portion of these cost savings in strategic areas of the company including research and development, professional services, marketing and the direct sales force.” “Our financial performance is directly related to our efforts to strengthen the company and execute on our plan to deliver cross-vendor solutions that help our customers more fully leverage the power of the Internet,” said Dale Fuller, Inprise/Borland’s interim president and CEO. “This past quarter we’ve made great strides toward achieving our objectives by bringing in additional senior-level management, creating three distinct business units and unveiling strategic initiatives.”

JDS UNIPHASE PROFITS EXCEED ESTIMATES

San Francisco, CA — The JDS Uniphase Corporation, a fast-growing maker of components for fiber optic networks, reported fourth-quarter earnings that exceeded analysts’ estimates when excluding charges for the company’s wave of acquisitions. For the quarter ended June 30, JDS, based in San Jose, Calif., and Nepean, Ontario, posted a net loss of $419 million, or 54 cents a share, compared with a loss of $194.3 million, or 60 cents a share, in the period a year earlier. Excluding merger-related charges and other special items, JDS Uniphase reported profit of $114 million, or 14 cents a share. In the period a year earlier, the combined profit of JDS Fitel and the Uniphase Corporation – which merged in June 1999 – was $41 million, or 6 cents a share. Sales grew 173 percent, to $524 million from $192 million. Analysts had expected the company to earn 12 cents a share, according to First Call/Thomson Financial. Although JDS Uniphase reported its results after the markets closed, investors anticipated a strong quarter and drove the company’s shares up $5.75, to $135.9375, in Nasdaq trading.

JDS Uniphase traded more shares in a single day than any other United States stock – just more than 200 million – as money managers added it to their holdings before it became part of the Standard & Poor’s 500-stock index. The stock was added to the S.& P. 500 after exchanges closed. In a conference call, executives of JDS Uniphase predicted that revenue growth would accelerate and increased their estimates of quarter-to-quarter growth to the high teens from 15 percent, not including the effects of acquisitions. Revenue in the most recent quarter grew 33 percent from the previous quarter, or 25 percent excluding acquisitions. Although JDS Uniphase’s explosive revenue growth was expected, “it shows you how powerful this industry is,” said Jim Kedersha, an analyst with SG Cowen. The company also benefits from a market where demand exceeds supply and the barriers to adding supply are high, he said.

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Cray, Fujitsu Both Bringing Fujitsu A64FX-based Supercomputers to Market in 2020

November 12, 2019

The number of top-tier HPC systems makers has shrunk due to a steady march of M&A activity, but there is increased diversity and choice of processing compon Read more…

By Tiffany Trader

When Dense Matrix Representations Beat Sparse

September 9, 2019

In our world filled with unintended consequences, it turns out that saving memory space to help deal with GPU limitations, knowing it introduces performance pen Read more…

By James Reinders

With the Help of HPC, Astronomers Prepare to Deflect a Real Asteroid

September 26, 2019

For years, NASA has been running simulations of asteroid impacts to understand the risks (and likelihoods) of asteroids colliding with Earth. Now, NASA and the European Space Agency (ESA) are preparing for the next, crucial step in planetary defense against asteroid impacts: physically deflecting a real asteroid. Read more…

By Oliver Peckham

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