Clash takes toll on Sun profit

The true cost of the bust-up between Sun Microsystems and its New Zealand agent, SolNet, has finally emerged, with the hardware giant reporting a 23 per cent drop in revenue for last year.

According to results filed with the Companies Office for the year to June 30, 2004, Sun's New Zealand revenue went from $83.7 million in 2003 to $64.3 million.

A pre-tax profit of $8.4 million turned into a loss of $639,103.

Even more striking, bad debt expense was $6.8 million, which Australia and New Zealand managing director Jim Hassell said could be attributed to SolNet.

He said Sun was still awaiting the liquidator's report on SolNet, renamed S Resources, and could consider legal action at that point.

Hassell put the blame for the break-up on the New Zealand company.

"Our relationship with SolNet was severed as soon as it told us it had gone into insolvency, which broke the contract we had with it."

Former SolNet Ltd managing director Mark Botherway disputed that.

"Sun held all the cards and played them the way it wanted," he said.

"In a situation where you have a major supplier with whom you try to negotiate an arrangement in good faith, you are not insolvent until it informs you it is not prepared to enter dialogue or sensible commercial arrangements.

"We went to great lengths to maintain our relationship with Sun. It chose to take things in a completely different direction. We at all times behaved appropriately," he said.

Hassell said the revenue decline was due to disruption in the business as Sun built up its direct sales team and found other New Zealand partners.

It now has 45 staff in the country.

"This year revenue has picked up significantly. The first half of the year is 15 per cent up on the first half of last year," Hassell said.

He said while pent-up demand and trends such as server consolidation were helping sales, Sun's decision to give away the Solaris 10 operating system was driving interest in Sun hardware and services.