Sun blames Wall Street for $1.7 billion loss

Sun Microsystems has blamed the downturn in the financial sector for its reported a US$1.68 billion (£1.05 billion) loss for its most recent fiscal quarter.

Share

Sun Microsystems has blamed the downturn in the financial sector for its reported a US$1.68 billion (£1.05 billion) loss for its most recent fiscal quarter.

The bulk of the loss came from a one-time $1.45 billion (£899 million) goodwill impairment charge. Excluding this and other one-time charges, the loss was $65 million (£40.3 million), or $0.09 (£0.06) per share. Revenue for the quarter ending September 28 was $2.99 billion (£1.85 billion).

Last week, Sun pre-announced 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.

"Overall, it was a challenging quarter," said President and CEO Jonathan Schwartz. "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. Financial sector revenue in the Northeastern US was down 20 percent year on year, while North American revenue dropped 13 percent overall, Sun said.

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

Shortly after last week's earnings pre-announcement, 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 start-up 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.

"Recommended For You"

Sun Microsystems posts $67m quarterly profits Wall Street Beat: Tech earnings highlight weakness in social network sector