Sun Says Its Sales Have Slowed
Sun Microsystems Inc., whose server computers run networks and Internet sites, said Wednesday that orders are lower than expected so far this quarter, which will make it difficult for the company to meet its sales target.
“It would take a very large month of September for us to hit the break-even point,” Chief Financial Officer Mike Lehman said on a conference call to update investors on the company’s business. “I’m not counting on it. I just don’t think it’s realistic at this point.”
Lehman declined to give a sales forecast for the company’s fiscal first quarter ending next month. In July, the Palo Alto-based company said sales would be more than $3.7 billion, the point at which Sun would break even before acquisition costs.
Sales in Europe and Japan are below expectations, with U.S. revenue coming in close to forecasts, Lehman said. In the quarter ended in June, Sun reported its first sales drop since at least 1992 as customers reduced spending on servers, storage gear and software.
“That doesn’t bode well for the upcoming earnings season,” said Bill Rutherford, whose Rutherford Investment Management owns 25,000 Sun shares. “We were hoping for some more signs of stabilization. We’re getting further erosion.”
The company is expected to earn 2 cents a share on sales of $3.8 billion for the first quarter, the average analyst estimate in a Thomson Financial/First Call survey. A year earlier, Sun earned 15 cents on sales of $5.05 billion.
Sun shares fell as much as 6% to $12.60 in after-hours trading on the news. The stock fell 13 cents to $13.43 in regular Nasdaq trading before the call and has tumbled 79% in the last year.
Sun said Wednesday it will end the quarter with 500 fewer employees. The company also has asked workers to take vacation days by year’s end to pare costs.
Sun has suffered this year as trouble at telecommunications and Internet customers quashed demand for servers, software and storage gear. Last year, those highflying customers drove sales growth of 35% or more in four straight quarters. The last two periods have been much tougher.
The company realigned its sales force to focus on the health-care, retail, automotive and energy industries. Sun wants to reduce inventory levels, trim more costs to bolster profit and improve the company’s storage products.
