"We do not believe we have used up our capacity to be a consolidator," Scott McNealy told analysts yesterday as Sun announced its Q4 results, including revenue of $11.1BN for its 2005 fiscal year, down 1% compared to last year's revenue of $11.2BN. The StorageTek and SeeBeyond acquisitions, in other words, won't be Sun's only moves. Meantime the technology world watches and waits.

McNealy perhaps make his remark partly to deflect attention from the fact that, while Sun continued to generate cash flow from operations, its quarterly revenue was $2.975BN, down 4.3% compared to last year's Q4 revenue of $3.1BN - though broadly in line with analyst expectations.

Net income was $121M, including a net tax benefit of $190M that was the result of adjustments to a reserve account as well as a tax expense on foreign earnings. Earnings per share according to GAAP was $0.04.

It was this tax benefit that gave Sun its small profit in its fiscal Q4 2005, which ended on 30 June.

Sun's CFO Steve McGowan (pictured) pointed out that Sun's gross margin on products and services was on the rise, standng at 42% for the year. This margin hike was improving operational cashflow and reducing debt, McGowan explained.

He was clearly happy that Sun was back in the black.

"We achieved impressive operational improvements in fiscal 2005 in the areas of gross margin dollars and percent, R&D and SG&A spend reductions, a $975 million non-GAAP net income improvement, and generation of $369 million positive cash flow from operations, our 16th consecutive year of generating positive cash flow from operations," McGowan noted.

"Putting our cash to work," added McNealy, "we've expanded our product portfolio and announced plans to acquire companies that deepen and broaden our systems strategy. We've materially grown our key communities including the Java, Solaris and SPARC efforts. We've maintained our R&D commitment and delivered crown jewels like Solaris 10 to the market," said Scott McNealy, chairman and chief executive officer, Sun Microsystems. "Big-time progress in FY05. The company is now in a position to take advantage of the investments we have made over the past few years and we believe there is more to come in FY06."

McNealy continued, "Our demand indicators for Q4 were positive. We have great partners, lots of cash, and a strong team across the board. FY05 was a year of stabilized revenue and earnings. Our opportunity for FY06 is sustained growth and profitability."