Sun Microsystems Swings to Loss Due to Write-Offs, Drop in Sales
By SIMON AVERY
Staff Reporter of THE WALL STREET JOURNAL
Sun Microsystems Inc. posted its first quarterly net loss in 12 years, reflecting substantial write-offs and a 20% drop in sales for the big computer maker.
The Palo Alto, Calif., company blamed macroeconomic conditions for the weak performance in its fiscal fourth quarter, specifically further decline of information-technology spending by companies in Europe and parts of Asia. It said it wouldn't offer any predictions for the current quarter or beyond until the end of August.
Sun Micro Warns 4th-Quarter Net May Trail Expectations by 67% (May 30)
For the three months ended June 30, Sun reported a net loss of $88 million, or three cents a share, including acquisition-related charges, a $78 million loss on its venture-equity portfolio, a $75 million charge from consolidating facilities and other special items. In the year-earlier period, Sun posted net income of $720.4 million, or 21 cents a share, adjusted for a stock split.
Excluding those special items, Sun said earnings per share were four cents, at the high end of a range of two cents to four cents Sun projected in late May. Analysts surveyed by Thomson Financial/First Call had expected the company to report three cents a share for the latest period.
Sun's revenue sank 20% to $4.0 billion from $5.02 billion, slightly above analysts' expectations of $3.89 billion.
Sun announced its results after the close of regular trading. As of 4 p.m. Nasdaq Stock Market trading Thursday, Sun was at $14.44, up 45 cents. In after-hours trading, the shares fell to $13.86, and were well off their record high of $64.66, reached last September.
Despite tough market conditions, Sun managed to increase orders slightly to $3.65 billion from $3.61 billion in the previous quarter.
On a regional basis, sales actually rose quarter-to-quarter by $200 million in the U.S., but were offset by a $200 million decline in Europe.
A year ago, Sun executives confidently predicted revenue would grow 30% for the fiscal year just ended, on top of the 42% growth reported a year earlier. But the implosion of the Internet start-up sector, along with the drastic decline of spending by telecommunication companies, has stymied growth.
Although the company has avoided the massive layoffs and inventory write-downs that have plagued other technology stalwarts, Sun has imposed emergency cost-cutting measures to try to preserve profitability. The company said it reduced selling, general and administrative expenses by 10% in the quarter compared with a year earlier, and at the same time raised investment in research and development by 17%.
"Yeah, we've taken a bit of a haircut on earnings, but we are protecting our long-term assets -- our R&D spending and our employees," Scott McNealy, chairman and chief executive, said in a call with investors.
Although the company refused to provide any guidance, executives said further interest-rate cuts and a full line of products running UltraSparc III, Sun's latest chip generation, would help it going forward.
Analysts, however, have expressed concern that Sun doesn't have the storage products to compete against such market leaders as EMC Corp. The company declined Thursday to discuss rumors that it is close to making a deal with Hitachi Data Systems Inc. to sell high-end storage computers.
Write to Simon Avery at simon.avery@wsj.com |
