Bad News, Good News at Sun

Updated from 8:11 a.m. EST

Sun Microsystems(SUNW) said second-quarter earnings and revenue will fall well short of expectations, and the struggling computer-server outfit outlined a restructuring in which it will cut 3,300 employees and take charges totaling $475 million.

Sun's stock tanked on the profit miss, but recovered when the company subsequently announced an agreement under which Microsoft(MSFT) will pay it more than $1.9 billion to settle antitrust and patent litigation and for royalties.

Sun expects to lose $750 million to $810 million, or 23 cents to 25 cents a share, in the quarter ended March 28, including a $200 million restructuring charge and a $350 million charge to increase the valuation allowance for deferred tax assets. Excluding the charges, Sun expects to lose between $200 million and $260 million, or 6 cents to 8 cents a share, on revenue of about $2.65 billion. ...