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Sun sees huge year-end charge on goodwill

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CIOL Bureau
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SAN FRANCISCO: Computer maker Sun Microsystems Inc. said it could take a non-cash charge of up to $2.2 billion for past acquisitions if its own market value did not more than triple by the calendar year-end. Sun disclosed the potential charge in an annual report filed on Monday that also revised upward by more than three-fold its reported fiscal fourth-quarter earnings, saying that costs had been less than it had earlier estimated.



The company itself said it would reconsider the value of its investments and acquisitions in Q2 , which finishes in December, if its market value, $8.4 billion on Sept. 30, did not recover to the April level of $29.1 billion. "This analysis could potentially result in a non-cash goodwill impairment charge, for the entire goodwill balance at June 30, 2002, of up to approximately $2.2 billion," Sun said in its report.



Sun said it had made a net profit of $61 million, or 2 cents per diluted share, in the quarter ended June 30, rather than the profit of $20 million, or 1 cent per diluted share, it had announced on July 18.



"Subsequent to that date, we became aware of additional information related to our vacation and commission accruals that indicated that our initial estimates of these costs should be reduced," the company said in its annual filing with the Securities and Exchange Commission.



Sun makes sophisticated computers that manage networks, a market which took off with the Internet boom and imploded with the bust over the last few years. Sun has found new markets and says it is winning business from rivals International Business Machines Corp. and Hewlett-Packard Co., but analysts and investors have questioned the value of its stock and ability to recover quickly.



Shares of Sun ticked up a penny in after hours trade from its close of $2.59 on the Nasdaq, where it fell 8 cents, or 3 percent, during regular trade. The stock has lost about 79 percent of its value since the start of the year.



© Reuters

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