The server maker updated investors on its fiscal second-quarter 2002 progress after the market closed Thursday, but had little to add. According to CFO Mike Lehman, Sun's order rates are tracking sequentially higher -- with the caveat that Sun usually gets 50% of its business in the last four weeks of the quarter. Sun never gave revenue guidance and refused to do so again Thursday. Sun also wouldn't give a loss estimate, and stuck with its previous estimates that it would become profitable again in the June quarter of next year. Sun finished Thursday trading down almost 3% at $14.15.
Sun's September quarter was traumatic. The server maker posted only $2.86 billion in revenue, a 28% sequential decline and a 43% year-over-year step down. Before the events of Sept. 11, Sun was expected to deliver $3.5 billion in revenue, but after losing a few weeks of business after the attack, Sun warned Oct. 5 and outlined a rocky set of quarters ahead.
COO Ed Zander argued on the call Thursday that rejuvenating Sun's revenue is more difficult than getting back three weeks of business lost after the Sept. 11 attacks. The executive outlined a customer base facing increased economic insecurity, riddled with earnings problems and bankruptcies. Referring to high-profile bankruptcies such as Enron, Zander is resigned to the fact that each new failure among its customers produces "potentially more
used products on the market" and takes away buyers.
When prodded to divulge revenue guidance and potential for better earnings results, Lehman indicated that there are no data to get the Street jazzed on Sun's prospects. He explained that there hasn't been "a significant quantum leap in volume" to increase the company's gross margins, and that with no changes in component prices, "it's reasonable to assume that the gross margin will be in the flat kind of range. There are no dynamics to move it one way or another." Meanwhile, Sun's not making a peep about revenue, so the Street is going to have to sit on its hands until January's second-quarter earnings report.
Sun's results plunged into the red last quarter, the first quarter of fiscal 2002, with a pro forma loss of 5 cents a share.
Sun reiterated plans to take a charge of $500 million or more in the second quarter to cover the costs involved in laying off 9% of its workers. Lehman said Sun is down to 40,000 employees now and could be down to 38,000 by the end of the quarter.
The Street currently expects Sun to lose 7 cents a share in fiscal 2002 on $12.9 billion in revenue. By comparison, in 2001 Sun turned in 44 cents a share profit and $18.25 billion in revenue.