Sun blames Wall Street for $1.7B loss

Sun reported a quarterly loss Thursday, blaming the downturn in the financial sector.

Blaming the downturn in the financial sector, Sun Microsystems reported a US$1.68 billion loss for its most recent fiscal quarter on Thursday.

The bulk of the loss came from a one-time $1.45 billion goodwill impairment charge. Excluding this and other one-time charges, the loss was $65 million, or $0.09 per share. Revenue for the quarter, ended Sept. 28, was $2.99 billion.

Last week, Sun preannounced its earnings for the quarter, saying that revenue would fall below expectations and that it would report a larger-than-expected loss. The company has now missed analyst expectations for three straight quarters, and its profit margins are eroding as it is increasingly selling low-end servers while being squeezed by competitors.

Despite the warning, which said Sun's profit and revenue would fall within certain ranges, the company still fell short of analysts' expectations. The consensus of analysts surveyed by Thomson Financial had called for a loss of $0.08 per share on revenue of $3.06 billion.

"Overall, it was a challenging quarter," said President and CEO Jonathan Schwartz on a Thursday conference call with investors. "We saw softness in demand across North America, Europe and Asia Pacific"

Sun blamed its revenue shortfall on trouble in the financial services sector, in particular, which has been hammered by the global financial crisis. Financial sector revenue in the northeastern U.S. was down 20 percent year over year, while North American revenue dropped 13 percent overall, Sun said.

Wall Street has long been a stronghold for Sun's servers and workstations.

There has been other bad news for Sun lately, too, as its stock has hovered near 10-year lows.

Shortly after last week's earnings preannouncement, Sun's largest shareholder, Southeastern Asset Management, changed its ownership status in the company in a way that allows it to take a more active hand in company management.

The next day, one of Sun's brightest engineers, Chief Scientist Andreas Bechtolsheim, said he was taking a job with startup Arista Networks, which he founded. Bechtolsheim will stay with Sun part time, but his new position is not exactly a vote of confidence for Sun.

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Robert McMillan

IDG News Service
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