Sun struggles to see the light after bad financial report

THINGS ARE NOT LOOKING bright for Sun Microsystems which just announced a $1.67 billion loss in the last quarter.

Now Sun execs are frantically looking at their options to avoid being beaten up by the Wall Street bullies who have already given the company's shares quite a thrashing in recent months.

Sun will be feeling the heat after the Santa Clara based firm posted just $2.99 billion in total sales in this last quarter, down by 7.1 per cent from the same time last year. Product sales also took a hit, dropping 10.9 per cent to $1.76 billion, and services sales lost one per cent, reaching $1.23 billion. A real Ur-annus horribilis for the firm.

But talking to press yesterday, Sun God and CEO Jonathan Schwartz reckoned there was no need for panic just yet as the firm still had has $3.1 billion in cash and short-term investments. He also dismissed notions that Sun might start flogging its assets to raise a bit of spare wonga. The strategy Sun apparently intends to follow is more based on what Schwartz called "targeted acquisitions" and reaching out to new customers by shamelessly plugging the Sun brand name.

Just how popular that brand name proves to be after a recent loss of about $2.24 a share, a $1.45 billion charge to write down the value of past acquisitions and $63 million in layoff costs from earlier this year, remains to be seen.

Of course Schwartz blames the credit crunch and the firm’s biggest buyers in the financial service industry having to tighten their belts, thereby not buying quite as many high-end server and storage systems as Sun would like.

But excuses might not cut it this time around and, although Sun has said nought, some analysts are already predicting layoffs and, even worse, a potential takeover.

Reps from Southeastern Asset Management, the Tennessee investment firm which recently snapped up 21 per cent of Sun, say they still have faith that Sun will burn bright and apparently plan on having talks with the firm "and/or third parties" about improving the stock value.

Sun stock actually closed slightly up on Wednesday, before releasing its earnings report, at $5.29, a 9.5 per cent boost. But the shares sank again in late trading once the extent of the financial damage was brought to light.

Sun has already said it is in for some restructuring to cover some of the losses incurred by its iffy acquisitions of StorageTek a few years ago and, more recently, STK and MySQL.

Hopefully the tech giant can turn things around before it turns into a death star. µ

L'Inq
Mercury News
Sun Financial Report (PDF)