Concerns about the economy led customers to delay higher-end system purchases during the last quarter, so sales were down compared to last year for Sparc enterprise servers as well as the software and services normally sold with them, CEO Jonathan Schwartz said during a conference call Tuesday.

Overall systems revenue declined 14 percent year over year to $1.37 billion, CFO Michael Lehman said. Storage revenue fell 13 percent to $570 million, and services revenue declined 6.2 percent to $1.28 billion, he said.

Schwartz argued that those numbers tell only part of the story. The CEO likes to view Sun's business in two parts -- "traditional" products like its Sparc Unix servers, where sales are declining, and "growth" products like its open-source software and multi-threaded Niagara servers, where business is growing.

Niagara sales increased 31 percent year over year and are now selling at an "annual run rate" of about $1.4 billion, Schwartz said, using a figure arrived at by extrapolating from the sales in the first two quarters of the year. Its x86 server business increased 11 percent year over year, while sales of its newer Open Storage products increased 21 percent. Software was a "shining light" in the quarter, Schwartz said, increasing 21 percent for an annual run rate of $600 million.

Those growth products accounted for about one-third of Sun's business during the quarter, up from 23 percent a year earlier, Schwartz said. Viewed from that perspective Sun's business looks more healthy, but its challenge is to grow those businesses faster than its traditional businesses are declining, something that is not happening yet.