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. Last Updated: 07/27/2016

Sun's Profits Rise Despite Crisis




Sun Microsystems is enjoying record profitability in Russia and the surrounding region, despite stagnant sales caused by the continuing economic aftershocks from last year's financial crash, company officials said Tuesday.


Sun, a publicly traded U.S.-based company with profits last year of $1.15 billion on earnings of $11.7 billion, refuses to release its financial results for individual countries or regions.


However, it said it escaped largely unscathed from the post-crisis contraction of the Russian information-technology market, a trend that experts say has been apparent for those companies that provide IT to corporate clients.


"We saw a slight decrease in turnover, but nevertheless, our profits here were the highest they've been since Sun came to Russia," said Sergei Tarasov, sales and marketing director for Sun Microsystems AB, Sun's Russian subsidiary.


Company officials said that sales in the telecommunications, banking and government sectors, which provide the backbone of the company's client base worldwide, remained strong, as did sales in the energy sector, a particularly lucrative business in Russia.


Industry professionals said Sun's post-crisis success on Russia's corporate computing market is not unique.


"I have not seen the downturn people expected in the number of financial computing projects for corporate clients," said Matthew Dunn, head of consulting for Terralink Corporation, a Canadian firm specializing in corporate IT solutions.


Lyudmila Fateyeva, marketing director for Hewlett-Packard in Moscow, said that her firm, a direct competitor of Sun, also maintained strong sales in banking and government, as well as machine building and aerospace sectors.


By contrast, the personal computer market has shrunk by 36 percent since last year, Reuters reported IDC, a market research company, as saying. In the first quarter of this year, only 214,454 personal computers were sold in Russia, compared to 335,084 over the same period in 1998.


At Sun, desktop computers, which made up 20 percent of its sales in the 1997-98 fiscal year, accounted for only 10 percent for the fiscal year to June 30, 1999. However, the share for workgroup servers increased from 8 percent to 25 percent, according to company figures.


Sun officials said that the company had benefited from the ongoing consolidation of the banking sector, which has spurred a demand for more powerful corporate IT systems, and the start of the Russian election season, which has generated technology investments in electronic media.


In an interview, Luc Opdebeeck, Sun's manager for the Commonwealth of Independent States, said that Russian operations suffered few of the direct effects of the crisis, such as bank closures and defaults on corporate accounts.


His CIS area of oversight encompasses the former Soviet republics, except for the Baltic States and the Central Asian republics.


"We did not lose any money in the banks. We did not even have to write off any [corporate] accounts, which is always the biggest thing you have to ask yourself when something like this happens: Which accounts are receivable, and which you have to write off?"


Citing a stabilizing economy, Opdebeeck predicted 20 percent growth in sales for next year.