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Sun Microsystems issues sales and profits warning

Antony Savvas

Sun Microsystems has issued a first quarter sales warning and admitted its losses may be higher than expected.

The struggling firm, which has already shed thousands of staff and has seen server sales continually slump, says it has been hit by the recession. Sun watchers, however, may feel the company is in terminal decline, as Sun has been losing money for some time.

For the first quarter ended 28 September, Sun says it expects to report sales in the range of £1.73bn to £1.79bn, compared with £1.89bn seen in the first quarter last year.

Sun anticipates a net loss per share in the range of £0.15 and £0.21, and that is before a planned asset goodwill write-off associated with the £2.35bn takeover of StorageTek three years ago.

Net losses per share include a restructuring charge of about £35m linked to the restructuring announced on 1 August.

On the write-off, Sun said, "Based on a combination of factors, including the current economic environment, Sun's operating results, and a sustained decline in Sun's market valuation, the company has concluded that it is likely that the fair value of one or more of its reporting units [StorageTek] has been reduced below its carrying value.

"As a result, Sun is currently conducting an interim goodwill impairment analysis to determine the required amount of the non-cash impairment charge, if any. As of 28 September, prior to the impact of this potential non-cash impairment charge, Sun's total goodwill balance was £1.88bn, of which £1.06bn relates to reporting units that may be impaired."

Jonathan Schwartz, under seige CEO of Sun Microsystems, still managed to find a silver lining amid the gloom. He said, "Sun and its customers are seeing the impact of a slowing economy. We believe we are positioned to offer the kinds of products that can radically help customers reduce expenditures for their infrastructure, from open storage and Solaris-based Chip Multi-Threading systems to offering the most eco-efficient systems in the market."

A familiar mantra from Schwartz, which may not be enough to preserve Sun's reputation in the market. The first quarter results will be posted on 30 October.


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