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Sun Loses Staggering $1.67 Billion in Quarter

Sun wouldn’t give any guidance and wouldn’t say whether more layoffs were in the works
By Maureen O'Gara
Article Rating:
October 31, 2008 11:00 PM EDT
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 2,754

Sun wouldn’t give any guidance and wouldn’t say whether more layoffs were in the works when it reported late Thursday that it wrote off $1.44 billion worth of its business in the September quarter – its forced answer to the “new economic reality.”

All together it lost $1.67 billion ($2.24 a share) in what is for Sun its first fiscal quarter and a bad beginning for the year.

The company did not explain which units suffered the goodwill impairment. It said last week that it would write down the value of one or more of its reporting units but didn’t indicate how much that would amount to. It put losses at 25 cents-35 cents a share.

Revenues in the quarter came to $2.99 billion, down 7.1% year-over-year, with system sales off 15%, which it attributed to the downturn. Its gross margin was 40.2%, down 8.3 percentage points.

The results included a restructuring charge of approximately $63 million, roughly $40 million less than expected. It said it hadn’t gotten around to handing out all the pink slips it anticipated.

Net it lost nine cents a share. It was expected to lose eight cents.

Sun still has $3.12 billion in the bank and according to CEO Jonathan Schwartz is going to pursue targeted acquisitions rather than sell assets.

Yet Sun has been criticized for its $4.1 billion acquisition of StorageTek – storage sales were up 0.4% – and its billion-dollar acquisition of MySQL. Jonathan continues to cling to the idea that Sun can sell hardware into MySQL’s users, most of which don’t even pay for the software.

Published October 31, 2008 – Reads 2,754
Copyright © 2008 SYS-CON Media, Inc. — All Rights Reserved.
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Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025.

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