Sun Stock Slumps After 1Q Warning, 4Q Charge - InformationWeek

InformationWeek is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them.Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Software // Enterprise Applications

Sun Stock Slumps After 1Q Warning, 4Q Charge

The company's stock fell more than 14% after it warned of disappointing first-quarter results and took a charge that wiped out its small 4Q profit.

SAN JOSE, Calif. (AP) -- Sun Microsystems Inc.'s shares plunged more than 14 percent Tuesday after the computer maker warned of disappointing first- quarter results and announced a massive charge that more than wiped out its meager fourth quarter profit.

The stock fell 55 cents to close at $3.31 in trading on the Nasdaq Stock Market.

Including a $1.05 billion charge, Sun said Monday it lost $1.04 billion, or 32 cents per share, in its fiscal fourth quarter, which ended June 30. It previously had reported a profit of $12 million, or break-even on a per-share basis, for the period.

The Santa Clara, Calif.-based company also said it expects to post a loss of 7 cents to 10 cents per share for the quarter that ended Sunday. The company declined to be more specific, saying it would report its full results Oct. 16, as scheduled.

Analysts were expecting Sun to report a first-quarter loss of 2 cents per share on sales of $2.71 billion, according to a survey by Thomson First Call.

In September, Sun said it was cutting 1,080 jobs, or 3 percent of its work force, to trim costs and return to sustained profitability. Previous major cuts included 11 percent of its work force, or 4,400 jobs, in 2002, and 10 percent, or nearly 3,900 jobs, in 2001.

Sun, once a darling of the Internet boom, has faced not only sagging sales from the overall slowdown in spending by its corporate customers but also intense competition from the makers of servers that run inexpensive software on low-cost hardware.

"The fact that Sun is under some considerable market-share pressure isn't really a surprise for anybody watching the space," said Richard Chu, an analyst at SG Cowen Securities Inc. "They're fighting a very tough battle at the low end."

Sun has made a number of major announcements in recent weeks, including new software and hardware just days before its latest layoff news broke.

"What you have to keep in mind is a lot of that stuff is not deliverable yet--you can't touch it or feel it," Chu said. "That's a tough position to be in when the only thing that you can sell is vision and a roadmap."

With more than $5.7 billion in cash, Sun isn't likely to go away anytime soon. But more cost cutting--including head count reductions--are likely if Sun wants to maintain its cash stockpile while waiting for its technology bets to pay off, Chu said.

The charge announced Monday is to boost a "deferred tax assets valuation allowance," which was calculated when its fourth-quarter earnings were announced July 23 and recalculated before those figures were reported officially to the Securities and Exchange Commission.

Sun said it reflects a "particularly difficult quarter for the company due in part to intense market and competitive dynamics."

We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
Comment  | 
Print  | 
More Insights
2021 Outlook: Tackling Cloud Transformation Choices
Joao-Pierre S. Ruth, Senior Writer,  1/4/2021
Enterprise IT Leaders Face Two Paths to AI
Jessica Davis, Senior Editor, Enterprise Apps,  12/23/2020
10 IT Trends to Watch for in 2021
Cynthia Harvey, Freelance Journalist, InformationWeek,  12/22/2020
White Papers
Register for InformationWeek Newsletters
Current Issue
2021 Top Enterprise IT Trends
We've identified the key trends that are poised to impact the IT landscape in 2021. Find out why they're important and how they will affect you.
Flash Poll