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Sun Foresees Larger Loss in Quarter

The computer maker also says it will revise previous results downward to include a $1.05-billion charge.

September 30, 2003|From Reuters

Sun Microsystems Inc. on Monday warned that it would post a larger loss in its fiscal first quarter than Wall Street had expected and would revise its fiscal fourth-quarter results to include a $1.05-billion charge related to deferred tax assets.

Shares in Sun, a maker of powerful network computers used widely by telecommunications and financial services companies, fell in after-hours trading.

Sun said it would revise its fourth-quarter results to show a net loss of $1.04 billion, or 32 cents a share, instead of the net income of $12 million, or break-even on a per-share basis, it had reported in July. Sun said an accounting adjustment related to deferred tax assets was responsible for the charge.

The high-tech recession has been harder on Sun than on its rivals, which have undercut the company with cheaper computers that use industry-standard components.

"Clearly, the pricing environment continues to be very difficult for Sun, and it's a company that continues to struggle," said Brent Bracelin, an analyst at Pacific Crest Securities.

Santa Clara, Calif.-based Sun competes principally against Hewlett-Packard Co., IBM Corp. and Dell Inc. Analysts have said Sun is getting squeezed on the high-end server market by HP and IBM and on the low end by Dell.

Sun said it now expected a fiscal first-quarter net loss of 7 to 10 cents a share, including a tax provision of about $34 million, or 1 cent a share.

Analysts on average had expected the company to post a loss of 2 cents a share, within a range of a loss of 3 cents a share to break-even, on revenue of $2.72 billion.

Sun has restructured and laid off thousands of employees since the high-tech downturn began and is now making big bets with its N1 computing architecture, which aims to automate tasks such as allocating storage and computer power.

"We continue to be very bullish about a recovery in the server industry, but Sun is just not a company that's benefiting from the turnaround, and they are becoming essentially less and less relevant," analyst Bracelin said.

The deferred tax assets responsible for the fourth-quarter charge include previous quarterly tax losses and tax credits, including credits for research and development, a Sun spokesman said.

"They are realized in the future based on income and are subject to what we think our future earnings are likely to be using our best estimates," the spokesman said.

"We took into account our progress against the planned forecast of operating results for the not-yet-reported first quarter of fiscal 2004."

Sun stock was halted just after the close of regular U.S. trading.

When trading resumed after the bell, Sun shares fell to $3.46 on the Instinet electronic brokerage system after rising 2 cents to $3.86 in regular Nasdaq trading.

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