As Oracle readies takeover, Sun's loss widens

Apr 28, 2009 By JORDAN ROBERTSON , AP Technology Writer
In this Nov. 14, 2008 file photo, the exterior view of Sun Microsystems Inc. headquarters in Santa Clara, Calif. is shown. Sun Microsystems Inc.'s loss ballooned in the latest quarter as restructuring charges and a 20 percent drop in sales compounded the financial woes Oracle Corp. is set to inherit by acquiring Sun for $7.4 billion, the company said Tuesday, April 28, 2009. (AP Photo/Paul Sakuma, file)

(AP) -- Sun Microsystems Inc.'s loss ballooned in the latest quarter as restructuring charges and a 20 percent drop in sales compounded the financial woes Oracle Corp. is set to inherit by acquiring Sun for $7.4 billion.

Sun, a server and software maker whose wobbly performance for most of the last decade pushed it into Oracle's clutches, said after the market closed Tuesday that it lost $201 million, or 27 cents per share, in the three months ended March 29. A year ago, Sun lost $34 million, or 4 cents per share.

Stripping out one-time charges, including $46 million for a restructuring that has cost thousands of workers their jobs, the latest quarter's loss amounted to 7 cents per share. Analysts were expecting a loss of 19 cents per share, but the numbers don't directly compare because Sun subtracted out charges that analysts didn't.

When both sides use the same metric, Sun says its loss was 5 cents per share wider than estimates.

Sun's sales of $2.61 billion were short of Wall Street's forecasts. Analysts surveyed by Thomson Reuters were expecting $2.86 billion.

Sun didn't provide color on the quarter and did not hold its customary conference call with analysts, probably because of the pending acquisition by Oracle, which is expected to close this summer.

The deal, announced last week, was a surprise because Oracle hasn't made hardware. More than half of Sun's sales come from its hardware division, primarily servers and data storage machines. And Sun's software properties, like the Java programming language and Solaris operating system, haven't been big moneymakers. Oracle thinks it can change that.

A key measure of how well Sun controlled its costs was off.

Sun's gross profit margin was 42.7 percent of the company's total revenue in the latest period. That measures how much money Sun made on each dollar of revenue, once manufacturing costs are stripped out. It was down 2.2 percentage points from the same quarter last year, indicating that Sun's deep cost-cutting wasn't enough to offset its rapid sales decline.

Sun's sales are suffering because of the recession - companies aren't forking out as much for computing infrastructure - and because of a shift in the industry away from the high-end, specialty servers that have long been Sun's own specialty.

Server sales in general are at their weakest point in seven years, according to market research firm IDC, chewing into the hardware numbers for Sun and bigger rivals like IBM Corp. and Hewlett-Packard Co. Sun's takeover by Oracle came about after talks with IBM broke apart on a standoff over price and other terms.

Sun's product revenue was $1.52 billion, down 24 percent from last year. Services revenue, which consists of things like technical support, was $1.10 billion, down 13 percent.

©2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Explore further: Are Silicon Valley tech giants real innovators or spoilt rich kids?

add to favorites email to friend print save as pdf

Related Stories

Oracle manages 3Q feat: healthy contract signings

Mar 18, 2009

(AP) -- Oracle Corp.'s sales force pulled off a big feat in the business software maker's latest quarter, sustaining a healthy clip of contract signings amid a dreary time for technology spending.

IBM stumbles on 1Q sales dip; profit beats Street

Apr 20, 2009

(AP) -- IBM Corp.'s first-quarter results slipped as all its major business units suffered declines, but the company backed its bullish outlook for 2009 on Monday, reflecting its belief that a broad mix of services and software ...

Software giant Oracle buys Java whizz Sun

Apr 20, 2009

Business software giant Oracle announced Monday it was buying Sun Microsystems and its Java programming language for 7.4 billion dollars after IBM abandoned its bid for the struggling tech company.

AMD posts deeper loss, shares fall

Apr 21, 2009

(AP) -- Advanced Micro Devices Inc.'s loss widened in the first quarter as demand and prices for its microprocessors slumped and charges for the biggest restructuring in the company's 40-year history took ...

National Semiconductor to cut 1,725 jobs

Mar 11, 2009

(AP) -- Faced with a steep decline in sales, chip maker National Semiconductor Corp. said Wednesday it will eliminate more than one-quarter of its work force, or 1,725 jobs.

Recommended for you

Tablets, cars drive AT&T wireless gains—not phones

1 hour ago

AT&T says it gained 2 million wireless subscribers in the latest quarter, but most were from non-phone services such as tablets and Internet-connected cars. The company is facing pricing pressure from smaller rivals T-Mobile ...

'Silicon Beach' brings tech boom to Los Angeles

3 hours ago

So long Silicon Valley. These days entrepreneurs and engineers are flocking to a place better known for surfing waves than the Web. Amid the palm trees and purple sunsets of the Southern California coastline, ...

User comments : 0