Hardware giant Sun Microsystems has reduced operating costs and seen annual sales growth of nearly £400m as part of its strategy to return to profitability.

Following last year's $301m (£148m) losses, the the world’s third largest maker of business servers exceeded fourth quarter profit targets with net income of $329m (£162m).

Fourth quarter sales are up just $7m (£3.4m) to $3.83bn (£1.88bn), but full year revenue has increased by more than $800m (£394m) to $13.9bn (£6.8bn). Profits for the year have also grown to $473m (£233m).

The results mark the third consecutive quarter of growth at the company after five quarterly losses. Sun Microsystems revamped its products and slashed jobs as part of recovery process.

‘With a solid strategy and consistent execution, we delivered on our commitment to achieve at least four percent operating margin in the fourth quarter,’ said Sun chief executive Jonathan Schwartz.

‘This milestone marks significant progress toward our longer-term growth plan of at least 10 per cent operating margin for 2009.’

Sun's Solaris 10 operating system, which has built-in virtualisation to generate more value from data centres, will provide much of its growth opportunities in the year ahead, says Schwartz.