Slow market spells trouble for Sun

Sun Microsystems warned that slow order rates for the company's hardware, particularly in Europe and Japan, will make it tough...

Sun Microsystems warned that slow order rates for the company's hardware, particularly in Europe and Japan, will make it tough for it to post a profit in its first quarter.

"It will be a real stretch to hit that $3.7bn (£2.55bn) number, which we characterised as break-even last quarter," said Michael Lehman, Sun's vice-president and chief financial officer.

Sun's business has suffered as telecommunications companies, service providers and financial services firms have cut back their spending on its hardware products. While government sectors have provided a bright spot for the company, overall sales have dropped to a point where Sun may well struggle to meet even conservative revenue estimates, Lehman said.

Financial analysts expected Sun to report earnings of two cents per share on $3.8bn (£2.61bn) in revenue, according to a consensus estimate compiled by Thomson Financial/First Call. The company's fiscal first quarter ends on 30 September, with the report of its results due on 18 October.

While business was weak this quarter in Europe and Japan, the US and most other regions generated sales close to Sun's expectations.

Sun would not speculate on its results for the second quarter, saying only that new products and the continued roll-out of its UltraSPARC III processor across its server and workstation lines should generate some improvement.

Sun plans to put a 900MHz version of the UltraSPARC III in some of its workstations later this quarter, Lehman said. Users can currently purchase a Sun Blade 1000 Workstation with the processor running at 750MHz.

Lehman said that the company had worked to cut excess spending in its operations, which should help it come closer to its revenue target. But he vowed that the company would not cut back on investments in future products.

"We are determined to keep investing [in research and development]," Lehman said.

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