Sun's Q3 loss widens on a 20 per cent revenue drop

Computer server maker Sun Microsystems reported a wider quarterly loss as sales fell because of lower technology spending and uncertainty over the company's future.

Analysts said Sun's business was hurt in the past few weeks of the quarter by news that it was in talks to be acquired by IBM, prompting some customers to hold off on making purchases until they knew the outcome.

Oracle later swooped in and agreed to buy Sun for more than $7 billion (Dh25.71bn), a deal that was announced on April 2.

Revenue fell 20 per cent to $2.61bn in Sun's fiscal third quarter ended March 29, compared with the average analyst forecast of $2.85bn, according to Reuters Estimates. Businesses were hesitant to buy Sun's computers out of concern that it might not be around to service that equipment if the unprofitable company failed to sell itself, analysts said.

"There was probably some pressure from the IBM saga that impacted the top line," said Cross Research analyst Shannon Cross. "It would have made it hard to close the quarter."

Excluding restructuring charges and related impairment of long-lived assets, Sun lost 21 cents per share in the quarter, compared with the loss of 19 cents a share expected by analysts.

Computer sales dropped 29 per cent to $1bn, while storage equipment sales fell 20 per cent to $425 million. Software sales rose 27 per cent to $187m, while services revenue fell 13 per cent to $1.1bn. Gross margin shrank 2.2 percentage points from a year earlier to 42.7 per cent. Sun reported a net loss of $201m, or 27 cents per share, versus a year-earlier loss of $34m, or four cents.

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