Sun Reports $201M Quarterly Loss

The financial health of Sun Microsystems is still grim, to the surprise of few analysts. However, the loss reported in Sun's quarterly earnings was not nearly as drastic as the nine-figure losses in some of Sun's earnings reports of the past few years.

Sun Microsystems, in the process of becoming the property of Oracle by the end of summer 2009, reported its quarterly earnings April 28. To the surprise of few industry observers, the financial health of the company and the general trend of the numbers remain grim.
However, although Sun reported a GAAP (Generally Accepted Accounting Principles)-based loss of $201 million in its third-quarter 2009 numbers, the total loss was not nearly as drastic as some of its earnings reports of the past few years, in which the company suffered losses of $500 million and above.
Sun declined to schedule a teleconference call for investors, analysts, media and other interested parties as it normally does.
The $201 million loss worked out to 27 cents per share. A year ago in the same quarter, Sun reported a $34 million loss. Revenues for the third quarter of fiscal 2009 were $2.6 billion, compared with $3.3 billion for the third quarter of 2008, short of Wall Street forecasts. The revenue result also represented a drop from the $3.2 billion reported for the second quarter of fiscal 2009.
Sun said the loss was caused by restructuring charges and a 20 percent drop in sales.
Positive cash flow in the face of downward sales trends

"I'm looking at the results in terms of trends," Gartner Research analyst George Weiss told eWEEK, while checking line items in the report. "The SPARC enterprise [processors] business was way down, and the CMT-chip multithreading; the Niagara T-Class processor line-business took a sharp turn down for the first time. That was one they were counting on [to be positive].
"Java income was up slightly, but not enough to make any kind of real difference. MySQL flattened out. Sun did report a positive cash flow of $180 million; I'm not sure how they figured that. But overall, it looks like Sun is hemorrhaging; they're down 20 to 23 percent from quarter to quarter. At that rate, I don't see how they can survive," Weiss said.

Weiss said although Oracle undoubtedly was aware of all these problems when it announced the acquisition April 20, Sun's financial bleeding is going to continue for the next few quarters, and things are going to get more challenging before it gets better for both companies.
"The playing field is getting incredibly more difficult to compete on," Weiss said, "with the macroeconomy, tighter budgets, margins coming down [by 2 percent in the third quarter of 2009] and head counts shrinking, Oracle and Sun have some great challenges to overcome."

Chris Preimesberger

Chris Preimesberger

Chris Preimesberger is Editor of Features & Analysis at eWEEK, responsible in large part for the publication's coverage areas. In his 12 years and more than 3,900 stories at eWEEK, he has...