Sun, AMD Warn of Poor Earnings

By eweek  |  Posted 2001-10-05 Print this article Print
Sun Microsystems Inc. and chip maker Advanced Micro Devices Inc. were the latest high-tech companies to warn this week that quarterly earnings will fall below Wall Street expectations. Sun said its earnings were hurt by the economic fallout from the Sept. 11 terrorist attacks in New York City and Washington.
Sun, a leading manufacturer of Unix workstations and servers, said a sudden drop in sales following the terrorist attacks would result in a larger loss for the quarter than it previously projected. About 340 employees who worked in the World Trade Center in New York were displaced when the towers were destroyed in the attacks. A company executive who was a passenger in one of two airliners that crashed into the towers also died.
Sun, based in Palo Alto, Calif., also said it would lay off 3,900 employees, about 9 percent of its work force, as a result of its lowered business outlook. "Our business nearly ground to a halt in the two weeks after that tragic day," Sun Chief Financial Officer Mike Lehman told market analysts during a conference call Friday. ``Further, we believe the impact of these events will not be limited to our fiscal first quarter. Even Scott McNealy, Suns often boastful CEO, spoke in somber tones. ``Were just not going to look very good this calendar year, he said during the conference call. ``Right now, people just arent buying." Sun now expects an operating loss of 5 to 7 cents a share for its fiscal first quarter, which ended Sept. 30. Wall Street had been projecting a loss of 4 cents per share, according to a survey of analysts by Thomson Financial/First Call. AMD, of Sunnyvale, Calif., blamed its woes on an ongoing price war with rival Intel Corp. The battle has resulted in a dramatic drop in average processor selling prices. AMD warned that its sales were off 22 percent and that it now expects to report a loss of between $90 million and $110 million, or 26 cents to 31 cents per share, for the three months ended Sept. 30, excluding one-time charges. Thats far steeper than the loss of 12 cents per share Wall Street analysts had been projecting, according to Thomson Financial/First Call. "In the face of very aggressive competition, average-selling prices for PC processors declined sharply, which resulted in substantially lower revenues," the company said in a statement issued Friday. During the quarter, major PC manufacturers IBM and Gateway Inc. announced that they would stop several systems featuring AMDs Athlon processor. Market analysts have speculated that AMDs recent losses are partly the result of increasingly aggressive sales efforts by Intel to win back market share it had lost to the much smaller chip maker over the last year.

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