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Sun Microsystems' third-quarter loss stuns Wall Street (Update)
In this April 23, 2007 file photo, Sun Microsystems racks are seen at Sun's offices in Menlo Park, Calif. Sun Microsystems Inc. is scheduled to report its fiscal third-quarter financial results after the markets close Thursday, May 1, 2008. (AP Photo/Paul Sakuma)
Instead, the Santa Clara-based server and software maker stunned investors Thursday by reporting a loss in its third quarter, caused in part by sagging sales to U.S. consumer-oriented companies that are putting off big-ticket spending for better times.
Sun's shares were quickly punished, dropping almost 15 percent in after-hours trading.
The company also forecast flat revenues for the fourth quarter and revealed plans to jettison between 1,500 and 2,500 jobs as it tries to snap out of a sudden financial funk.
Sun said after the market closed Thursday that it lost $34 million, or 4 cents per share, in the three months ended March 30. That's down from a profit of $67 million, or 7 cents per share, during the year-ago period.
The results for the latest quarter include costs of 4 cents per share from Sun's $1 billion acquisition of open-source software company MySQL AB, a purchase that gives Sun a foothold in the rapidly expanding market for database software for Web-based companies.
Sun also took a $52 million tax hit in the third quarter, compared with a tax benefit of $3 million in the same quarter last year.
Analysts surveyed by Thomson Financial had expected Sun to earn 18 cents per share.
The stock shed $2.41, or 14.8 percent, after hours, concluding at $13.93 after the results' release following the close of regular trading. It had ended up 67 cents, or 4.3 percent, at $16.33 in the regular session.
Sun's sales of $3.27 billion also came in below analysts' expectations. Wall Street was predicting Sun would have $3.38 billion in sales, a miss of more than $100 million.
The guidance for flat fourth-quarter revenue disappointed Wall Street as well. Analysts were expecting Sun's sales for the period to grow 3 percent over last year.
Sun's chief executive, Jonathan Schwartz, said in an interview that some of the weakness during the third quarter flowed from small businesses in the U.S. clamping down on spending.
"Smaller companies that could make discretionary decisions about (information technology) spending made discretionary decisions - they definitely tapped the brakes," Schwartz said.
Schwartz added that slower-than-expected sales to government agencies also dragged down the results.
Despite the credit and housing crunch that is ravaging the financial community, Schwartz said its business with the financial services sector actually came in ahead of the company's internal projections, indicating that banks and other financial institutions appear to be "using technology to drive down costs elsewhere."
Sun executives were tightlipped on where jobs will be cut now but said many would likely be in the U.S. The company cut about 4,000 jobs through layoffs and attrition shortly after Schwartz took over from co-founder Scott McNealy in 2006 and launched a wide-ranging cost-cutting effort.
Sun, a high flyer during the dot-com heyday, survived a mortifying slump after the dot-com meltdown in which the company racked up more than $5 billion in losses. Sun had posted five straight profitable quarters before the latest setback.
The stock hasn't been able to get back to the $20 range where it stood after Sun executed a 1-for-4 reverse stock split in November. The move was designed to shed the stigma of the slumping shares, but investors viewed it as a sign of trouble.
© 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
The company also forecast flat revenues for the fourth quarter and revealed plans to jettison between 1,500 and 2,500 jobs as it tries to snap out of a sudden financial funk.
Sun said after the market closed Thursday that it lost $34 million, or 4 cents per share, in the three months ended March 30. That's down from a profit of $67 million, or 7 cents per share, during the year-ago period.
Sun also took a $52 million tax hit in the third quarter, compared with a tax benefit of $3 million in the same quarter last year.
Analysts surveyed by Thomson Financial had expected Sun to earn 18 cents per share.
The stock shed $2.41, or 14.8 percent, after hours, concluding at $13.93 after the results' release following the close of regular trading. It had ended up 67 cents, or 4.3 percent, at $16.33 in the regular session.
Sun's sales of $3.27 billion also came in below analysts' expectations. Wall Street was predicting Sun would have $3.38 billion in sales, a miss of more than $100 million.
The guidance for flat fourth-quarter revenue disappointed Wall Street as well. Analysts were expecting Sun's sales for the period to grow 3 percent over last year.
Sun's chief executive, Jonathan Schwartz, said in an interview that some of the weakness during the third quarter flowed from small businesses in the U.S. clamping down on spending.
"Smaller companies that could make discretionary decisions about (information technology) spending made discretionary decisions - they definitely tapped the brakes," Schwartz said.
Schwartz added that slower-than-expected sales to government agencies also dragged down the results.
Despite the credit and housing crunch that is ravaging the financial community, Schwartz said its business with the financial services sector actually came in ahead of the company's internal projections, indicating that banks and other financial institutions appear to be "using technology to drive down costs elsewhere."
Sun executives were tightlipped on where jobs will be cut now but said many would likely be in the U.S. The company cut about 4,000 jobs through layoffs and attrition shortly after Schwartz took over from co-founder Scott McNealy in 2006 and launched a wide-ranging cost-cutting effort.
Sun, a high flyer during the dot-com heyday, survived a mortifying slump after the dot-com meltdown in which the company racked up more than $5 billion in losses. Sun had posted five straight profitable quarters before the latest setback.
The stock hasn't been able to get back to the $20 range where it stood after Sun executed a 1-for-4 reverse stock split in November. The move was designed to shed the stigma of the slumping shares, but investors viewed it as a sign of trouble.
© 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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