Sun sees another quarter of losses

Sun Microsystems announced it expects to report a financial loss in the

current second consecutive quarter, due to slow demand for servers in Europe and

Asia.  Though Sun has avoided massive lay off, without an upturn in sight

such a drastic action may be inevitable to keep expenses in line with revenues.

"I think it's a real stretch to hit the $3.7 billion number," said

Mike Lehman, Sun's chief financial officer referring to an earlier announced

sales target, adding that the firm's break-even level is just below $3.7

billion.   

Last quarter, Sun's revenues fell 20 per cent, resulting in the company's

first net loss since going public in 1989. Lehman declined to comment about

possible layoffs saying that would be counter-productive to the people working

at Sun and to the company's customers. "It will take a very large month of

September in terms of demand for us to hit the break even point. At this stage I

would not count on that happening," Lehman said.

Weakness was concentrated in Japan and Europe, with demand in the United

States only "a touch behind" forecasts, although Sun had expected U.S.

sales to fall in the first quarter from the fourth, he said. The new forecast

was below Wall Street expectations compiled by Thomson Financial/First Call of

first quarter revenue of $3.8 billion. On average Wall Street had expected 2

cents earnings per share, with forecasts ranging from a loss of 2 cents to a

profit of 4 cents.

With competition building up, Sun is seeing the first big rival in IBM’s

Linux-driven system. IBM announced a major coup this week with the New York

Stock Exchange moving their e-mail systems to IBM Linux servers that will

replace about 180 Sun servers.

Merrill cuts Sun’s outlook



According to Reuters, joining Goldman Sachs a day earlier, Merrill Lynch on
Wednesday, citing anemic demand, said it cut its 2002 outlook for Sun

Microsystems. Analyst Thomas Kraemer lowered his estimates for the fiscal first

quarter to a loss of 2 cents from a profit of 1 cent, with revenues targeted at

$3.6 billion instead of $3.7 billion.

For the second quarter, Kraemer cut his view to earnings of 3 cents from 8

cents previously. He also reduced his fiscal 2002 estimate to 27 cents from 38

cents a share, on revenues of $18.3 billion, down from $18.8 billion. Kraemer

said in a research note the current estimates assume some recovery in the

December quarter with "meaningful economic improvement following

that," he said.