Sun posts loss, cites Wall St woes

Revenue from financial services clients is down

Sun Microsystems reported a US$1.68 billion (NZ$2.84 billion) loss for its most recent fiscal quarter yesterday, but most of that was from a goodwill impairment charge.

The one-off charge amounted to US$1.45 billion. Excluding it and other one-time charges, the loss was US$65 million, or US$0.09 per share. Revenue for the quarter, ended September 28, was US$2.99 billion.

Sun recently 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.

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

Sun blamed its revenue shortfall on trouble in the financial services sector. Financial sector revenue in the northeastern US was down 20% year over year, while North American revenue dropped 13% overall.

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, Sun chief scientist Andreas Bechtolsheim said he was taking a job with startup Arista Networks, which he founded. Bechtolsheim will stay with Sun part time.

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