Sun Micro Posts $1.7 Billion Loss (Update)

SAN FRANCISCO -- With one of the pillars of its business crumbling, Sun Microsystems(JAVA Quote) is going into bunker mode.

Executives at the troubled computer maker announced a $1.7 billion net loss on Thursday, along with a hefty write-down, and promptly declared an information blackout.

Sun suspended any financial forecasts for the remainder of the fiscal year and threw into doubt its previous operating targets.

Sun executives also hinted that it was evaluating a variety of unspecified actions to return to profitability, but declined to provide any details.

Shares of Sun, which are down 75% in the past twelve months, were down 16 cents at $5.13 in extended trading Thursday.

"We're clearly experiencing a challenging economic environment," Finance Chief Michael Lehman told analysts in a post-earnings conference call Thursday, citing Sun's exposure to customers in the imploding financial sector at the center of the global credit crisis.

In its recently-ended fiscal first quarter, Sun's sales of computer systems fell 15% year over year, while sales of storage systems grew a scant 0.4%.

What's more, the portions of Sun's business suffering the most are the high-end computer servers and tape archiving systems - traditionally big-sellers at banks and other financial institutions - which carry some of the company's beefiest profit margins.

That put pressure on Sun's gross margin, which fell to 40%, vs. 44.3% in the previous quarter, and 48.5% at this time last year.

"My conversations with customers reflected consistent anxiety and a desire to push off large-scale purchases," said CEO Jonathan Schwartz.