Sun Microsystems Inc (NASDAQ: SUNW), the networking computing company, reported impressive cash generation metrics last night, while sales continued to be light.

For the June 2007 fiscal year, Sun generated $1.2 billion in operating income and cash flow from operations of $950 million -- a vast improvement. Gross margin also improved 200 basis points for the year and almost 400 basis points from last year's Q4.

The problem at Sun continues to be revenue growth, as there was little year-over-year growth in the current quarter and the company is guiding to low-to-mid single digit revenue growth for the year -- which is not a good sign for a technology company. Also, the company provided no guidance for the upcoming quarter, leaving much of the growth to the tail end of FY 2008, which typically is not good.

Sun announced that it will host its analyst day in New York on September 5 and mentioned that it will discuss its capital structure, which is not a subject that is typically highlighted, a sign something more dramatic might happen with the $5 billion in balance-sheet cash.

Overall, Sun has little downside risk and has a private equity investment via a convert priced in the $7 price range. The computer-is-the-network company appears it might be setting itself up for a private equity deal with its focus on higher margin businesses and better cost controls.