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Sun Microsystems Reports Loss for Year

The computer maker's fourth-quarter revenue falls 13%. Earnings news sends the firm's shares tumbling 10%.

July 23, 2003|Joseph Menn | Times Staff Writer

Sun Microsystems Inc. missed Wall Street estimates Tuesday and barely broke even in its fiscal fourth quarter, sending the computer maker's shares down 10% in after-hours trading.

Sun said profit fell to $12 million, or break-even on a per-share basis, from $61 million, or 2 cents, a year earlier. Sales fell 13% to $2.98 billion and dropped in every quarter of the company's fiscal 2003, ended in June.

The results were announced after the close of regular trading.

Sun also reported its second consecutive full-year loss, losing $2.38 billion, or 75 cents a share, as sales dropped 8.5% to $11.4 billion. For its fiscal 2002, the company lost $587 million, or 18 cents a share, on revenue of $12.5 billion.

Excluding losses on equity investments, the reversal of a previous restructuring charge and related tax effects, Sun would have reported a quarterly profit of 1 cent a share, half the consensus of Wall Street analysts.

Shares of the Santa Clara-based seller of high-end computers and related software, which gained 21 cents to $4.77 in regular Nasdaq trading, fell as low as $4.31 after-hours.

Sun executives touted the company's positive cash flow from operations and its $5.7-billion cushion in cash and marketable securities -- about a third of the company's stock market valuation.

But they offered little news in the way of strategy, saying in conference calls that they planned to continue cutting operational costs and introducing cheaper, slimmed-down machines.

"What will be the inflection point?" Sanford C. Bernstein analyst Toni Sacconaghi asked executives, noting the continuing decline in sales. "What will ultimately turn that around?"

Sun has gradually abandoned more of its longtime pattern of selling only bundles of its own chips, software and computers.

But it has been hard for the firm to shake its image as an expensive choice for corporate buyers.

Chief Executive Scott McNealy said the company had cut capital expenditures but not research and development. He said the resulting new hardware and software should reverse the long slide in sales.

In the next three months, the company plans to release a bundle of the Linux operating system and Linux-based applications for personal computers. Sun executives also said they would find a way to make more money from the widespread use of the company's Java programming language.

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