Sun Meets Lowered Guidance

The struggling firm posts a net loss of 23 cents on sales of $2.65 billion.
Publish date:

Updated from April 15

As expected,

Sun Microsystems

(SUNW) - Get Report

posted a large third-quarter loss and a heavy restructuring charge after the close Thursday.

Net loss for the quarter was $760 million, or 23 cents per share, compared with a $4 million profit a year ago. Revenue was $2.65 billion, a drop of 5% from the year-ago quarter. Both numbers were right in line with the reduced forecast the company released on April 2.

Without $503 million in charges, Sun would have posted an 8-cent loss.

Sun's cash position remains strong at $6.3 billion, and will get stronger as cash from its settlement with


(MSFT) - Get Report

flows in later this year.

Sun shares were recently off 14 cents, or 3.2%, to $4.28.

Earlier this month, the company

settled a long-running legal dispute with the software giant and will receive about $1.6 billion in damages later this year, plus another $350 million in royalty payments.

At the same time, Sun preannounced the quarterly shortfall and truce with Microsoft, it promoted Jonathan Schwartz, then the company's software czar, to president and chief operating officer. Like CEO Scott McNealy, Schwartz is known to be combative and smart, but his appointment got generally poor reviews.

Typical of the reaction at the time was that of Romeo Dator, who co-manages the

All-American Equity fund

at U.S. Global Investors. "They seem to be so insular. I think

an external hire wouldn't be so attached to the culture and probably would be more willing to shake things up."

However, Steve Milunovich, the influential hardware analyst at Merrill Lynch, called the appointment "a positive step," and there was a sense of relief that McNealy's role would be somewhat reduced.

On the whole, though, the market has not been happy with Sun this month. Earlier this year, the stock climbed strongly, slipped in March and was recovering nicely until the early-April preannouncement. Since then, the stock has dropped 10%, compared with 2% for the

Nasdaq Composite

as a whole.

Later Thursday, Sun will hold a conference call with analysts and investors at which the troubled company is expected to discuss details of its restructuring program and the 9% layoff announced on April 2.