Sun Microsystems Sees Rough Year, Shares Fall

Friday, 1 Aug 2008 | 8:13 AM ET

Sun Microsystems said on Friday it expects a tough fiscal year in the United States and warned that it would not turn a profit in the current quarter, driving shares down 9 percent on Friday.

The world's No. 4 maker of business computers said net profit for its fiscal fourth quarter, which ended June 30, fell to $88 million, or 11 cents per share, from $329 million, or 36 cents, a year earlier.

Sun Microsystems's headquarters in Santa Clara, California.
Paul Sakuma
Sun Microsystems's headquarters in Santa Clara, California.

Revenue fell 1.4 percent to $3.78 billion, as a 9 percent decline in U.S. sales hurt overall performance, according to a slide on Sun's website. The United States is Sun's biggest market, accounting for 38 percent of sales.

"We don't expect a lot in the U.S., even in the second half of the year," Sun Chief Executive Jonathan Schwartz said in an analyst call.

One problem he cited was U.S. financial services crisis.

"When you've got a $100 million customer that is not going to be growing its IT purchases but instead take it down 30 percent, that's a lot of customer acquisition to make up," Schwartz said.

The company said it does not expect to turn a profit in its current fiscal first quarter, which began July 1.

Sun's shares fell to $9.70 in pre-market trade, from Thursday's Nasdaq close of $10.63.

The company expects revenue to keep declining year-on-year until at least the second half of 2009, and the full year will see modest low single-digit growth in revenue.

"There's no question the challenging U.S. macro environment has hindered our ability to grow the top line and we've got a greater share of our business in the U.S. than many of our peers," Schwartz said.

He said customers held off on making large purchases of its high-priced, high-margin SPARC computers in the United States, reflecting what he described as "economic anxiety" rather than competitive pressures.

Sun's rivals include International Business Machines ,Hewlett-Packard and Dell .

Sun reported profit excluding items of 35 cents per share for the June quarter, at the high end of preliminary estimates it released on July 15.

At the time, the Santa Clara, California company said it expected fourth-quarter profit excluding items of 25 cents to 35 cents and revenue from $3.73 billion to $3.8 billion.

It said on Friday that revenue rose 4 percent in Europe, the Middle East and Africa, comprising 37 percent of sales.

Revenue was flat in the Asia Pacific, accounting for 17 percent of sales. In the Americas outside of the United States, revenue climbed 19 percent, accounting for 8 percent of sales.

The company also said its board authorized an additional repurchase of up to $1 billion of outstanding common stock.

  Price   Change %Change


Contact Technology


    Get the best of CNBC in your inbox

    › Learn More
  • Matt Hunter is the senior technology editor at CNBC.com.

  • Cadie Thompson is a tech reporter for the Enterprise Team for CNBC.com.

  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.

  • Jon Fortt is an on-air editor. He covers the companies, start-ups, and trends that are driving innovation in the industry.

  • Lipton is CNBC's technology correspondent, working from CNBC's Silicon Valley bureau.

  • Mark is CNBC's Silicon Valley/San Francisco Bureau Chief covering technology and digital media.