Updated from 5:02 p.m. EDT

Sun Microsystems

(SUNW) - Get Report

posted break-even earnings as expected, but sales fell more than $100 million short of expectations.

After hours, shares dipped 6 cents or 1.8% to $3.26.

Sales in the March quarter totaled $2.79 billion, 5% below the consensus estimate of $2.93 billion.

Net income was $4 million, or zero per share, according to generally accepted accounting principles.

TST Recommends

While EPS has marginally improved from last quarter's penny loss, revenues remain 10% below the level of the same quarter in 2002.

With the exception of a one-time profit in the June 2002 quarter, Sun hasn't been in the black since the March 2001 quarter.

As for guidance, CFO Scott McGowan said the company has historically seen anywhere from 20% sequential sales growth to a 2% drop-off in revenues in the fiscal fourth quarter now underway. "We won't give you a percentage, but we would expect growth in Q4," he said.

The post-earnings conference call featured some unusually blunt questions about how the company plans to turn around its lagging business. Among other things, analysts wondered why Sun suffered a revenue miss at a time most other tech outfits have managed to meet Wall Street's sales expectations.

McGowan explained sales in the just-ended quarter started off decently, but softened for about six weeks in the middle before strengthening toward the end. Customers were particularly wary about making larger purchases like data center products, he said.

Referring to the sales miss, CEO Scott McNealy said half-jokingly, "We want credit for not blaming SARS or the war."

Pointing to progress on cost-cutting, Sun said today it's reduced SG&A expenses by almost $200 million year over year. Last fall, the company announced layoffs amounting to 11% of its workforce.

In a statement, McGowan said, "Our significant cash and marketable securities balance of over $5.5 billion and demonstrated ability to continue generating cash are solid evidence of Sun's financial strength."