Sun Posts Loss for Fourth Straight Quarter
Sun Microsystems Inc. reported its fourth straight quarterly loss Thursday on restructuring costs and declining sales and said two senior executives would leave as newly appointed President Jonathan Schwartz put his management team in place.
Sun said it lost $760 million, or 23 cents a share, in its fiscal third quarter ended March 28, reversing a year-ago profit of $4 million, or break-even on a per-share basis. Sun shares fell 10 cents to $4.32 in after-hours trading after the announcements, extending a 14-cent drop in regular Nasdaq trading.
“I’d say it paints a pretty grim picture,” said Thomas Murphy, senior program director at research firm Meta Group. “Everyone was grimacing last year, so this is getting pretty scary. Sun’s made a lot of changes but it’s still got a tough road ahead.”
Sun warned two weeks ago that it would report a loss of $750 million to $810 million and that it would start cutting 3,300 employees, or about 9% of its workforce. The announcements coincided with the network computer company’s surprise settlement of antitrust and patent claims against Microsoft Corp. for $1.95 billion and the ascension of Schwartz to the No. 2 post at the Santa Clara, Calif.-based company.
On Thursday, Sun said the loss included $503 million in charges, of which $203 million was attributed to job and real estate restructurings.
Sales fell 5% to $2.65 billion, the 12th straight quarterly decline in the face of gains by less-expensive machines running on Linux software or programs from Microsoft. The falloff in sales was especially pronounced in the U.S., where revenue dropped 14% from a year earlier.
“It was disappointing from a revenue perspective,” Chief Executive Scott McNealy said of the quarter. “It was actually very pleasing from a volume and unit perspective.”
The company said Chief Strategy Officer Mark Tolliver and Executive Vice President Neil Knox would leave “to pursue other interests.” Neither could be reached for comment.
David Yen, 52, was named executive vice president in charge of Sun’s microprocessors and its computers based on those chips, while acting Executive Vice President John Fowler, 43, will be in charge of machines based on lower-cost chips from Intel Corp. and AMD Inc.
Analysts said they expected some turmoil from the changes, which followed the recent departures of other longtime executives.
McNealy said he expected minimal disruption. He added that Sun was poised to cut expenses in a more serious way.
“It’s time now to address the cost structure,” McNealy said during a conference call with investors and analysts.
He and Schwartz said the company was trying to build up its recurring revenue from subscriptions and services, noting that 175,000 individuals had signed up for a software package aimed at corporate users that costs $100 per year.
The executives didn’t dispute an analyst’s assertion that Sun needed millions of subscribers under that program to turn a substantial profit.
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Associated Press was used in compiling this report.
