“With falling revenue, problematic acquisitions, product slips and a stock that has lost three-quarters of its value in the last year, Sun Microsystems is finding that Wall Street is losing patience,” Ashlee Vance reports for The New York Times.
“For its first quarter, ended Sept. 28, Sun reported a net loss of $1.68 billion, or $2.24 a share, compared to net income of $89 million, or 10 cents a share, in the same period last year. The loss includes a $1.45 billion charge to write down the value of past acquisitions and a $63 million restructuring charge,” Vance reports. “The company’s revenue dropped 7 percent, to $2.99 billion, from $3.22 billion in last year’s first quarter.”
“Sun’s servers and Java software are the driving force behind many Web sites and business operations. But in recent years, Sun has struggled to adapt as customers gravitated away from its high-end machines that use custom software and processors to cheap computers powered by commodity parts and free, open-source software,” Vance reports. “Sun’s bets on new server and storage systems, new processors and its own open-source software have not come through as fast as the company had hoped.”
“Sun moved Thursday to placate Wall Street by disclosing more information than usual about its various product lines, showing strong growth with some of its more radical server designs and traditionally slow-selling storage products. It also hinted at impending layoffs,” Vance reports. “It is unclear if that is enough to satisfy some of Sun’s largest investors. ‘They need to cut,’ said Chris Whitmore, an analyst with Deutsche Bank.”
“Over the last few months, Southeastern Asset Management, a Memphis investment firm run by O. Mason Hawkins, has acquired more than 20 percent of the company. Southeastern has said it expects to actively engage in discussions with Sun’s management and third parties about the company’s future,” Vance reports.
“Last November, Sun tried to polish its image through a one-for-four reverse stock split. Over the last 11 months, Sun shares have tumbled to pre-split prices,” Vance reports. “Sun remains a cash machine, however, taking in more than $1 billion during its last fiscal year… Morale inside Sun, long a favored bastion of top engineers, is sagging, according to current and former employees. The company has endured a number of large layoffs in recent years, although the company still employs about 33,000 people.”
More in the full article here.
[Thanks to MacDailyNews Reader “HueyLong” for the heads up.]
MacDailyNews Note: Sun Microsystems’ (JAVA) market cap currently stands at $3.65 billion.