Sun blames $1.7-billion loss on the economy

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Sun Microsystems blamed the $1.68-billion (£1.3-million) loss it reported late yesterday on the financial downturn.

The server and software vendor had said last week revenue would fall and warned of a larger-than-usual loss. But the figures for the last quarter still came in at the lower end of its own estimates and missed analyst expectations for the third consecutive quarter.

The bulk of the loss was down to a one-time $1.45 billion (£887 million) goodwill impairment charge on its hardware systems unit that wrote down the value of the company and a $63 million (£38.5 million) restructuring charge.

And sales for Sun’s first fiscal quarter, ending 28 September fell seven per cent to $2.99 billion (£1.83 billion), coming in below Thomson Reuters’ analyst forecast of $3.05 billion.

“The economic downturn continued to weigh on our customers, especially those that contribute to our traditional high-end businesses,” said Jonathan Schwartz, Sun president and chief executive.

On a conference call with investors, he added: “Overall, it was a challenging quarter. We saw softness in demand across North America, Europe and Asia Pacific.”

Sun said revenue in the US overall had dropped 13 per cent overall, while falling sales in the UK financial services sector contributed lower European revenues as well.

But Schwartz was optimistic the downturn would not become a freefall, as customers were telling him they were having a credit crisis and liquidity problems. “They are saying: ‘We'll call you as soon as we have our funding issues resolved’,” he added.

Sun’s stock has fared badly in the last few weeks, hovering near ten-year lows. By contrast, rival IBM posted third-quarter profits two weeks ago that were up 20 per cent on 4.9 per cent more sales.

And, despite this quarter’s write-down, Sun still has $1.7 billion (£1.04 billion) in goodwill for its software and services units.

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