Sun still shining at $95m revenue

By ADAM GIFFORD

Combined New Zealand revenues for Sun Microsystems and its New Zealand reseller SolNet have grown slightly to $95 million, but SolNet's plans for rapid expansion into Australia seem to have hit a wall.

Combined revenues for the previous year ended June 30 were $93 million.

Managing director Mark Botherway said falling returns from hardware sales were offset by 20 per cent growth in the SolNet Development side of the business, which does custom development using Sun's Java /J2EE technologies.

"SolNet Development is getting up to being in the order of a $10 million business," Botherway said.

He said the performance of systems was increasing faster than demand.

"Before a company may have had to spend $500,000 on hardware. Now they can get what they need for $300,000."

Customers were also extending the life of Machines, replacing them every four or five years instead of every two or three years.

This problem is affecting Sun worldwide. Sun's worldwide revenue for 2003 declined 8.5 per cent to US$11.4 billion, leading to a loss of almost US$2.4 billion.

While the Sun-SolNet combined revenue announcement allows the market to get an overall picture of how Sun's technology is doing in the New Zealand market, it is difficult to separate out the individual threads.

As a private company SolNet is not required to make its earnings public. Sun does not reveal individual country earnings in detail, and the results it files with the Companies Office are calculated according to a different accounting standard than those used in the SolNet announcement.

Botherway said that meant inferences about SolNet's turnover could not be drawn from Sun's 2002 filing showing $83 million in revenue here.

Sun has about 35 staff in New Zealand who handle break-fix hardware and operating system support.

SolNet has about 120 staff here. It earns revenue from commissions, development and systems integration, and it also invests in some research and development on its own account.

Botherway said SolNet would no longer sell Sun technology on commission, but would issue its own contracts.

"Now we take the revenue on paper, put it through our books and pay Sun the buy price."

He said the new arrangement was more in line with Sun's worldwide practices, and would have little effect on the overall numbers.

SolNet expanded into Australia three years ago, buying a Melbourne software firm and establishing an office in Sydney.

Botherway said revenue across the Tasman was down on last year's $13 million, in part because the Melbourne operation was sold back to local management about three months ago.

SolNet will continue to operate out of Sydney.