Sun's revenue drops 20 per cent ahead of Oracle buy

The systems company reported its fourth loss in the past five quarters

Sun Microsystems reported a sharp drop in revenue for its third fiscal quarter, as the company battled uncertainty about its future along with the global recession.

Reports that Sun was up for sale surfaced in mid-March and analysts had speculated that the rumors would disrupt the company's efforts to close deals at the end of the quarter, which closed March 29. The initial suitor was reportedly IBM, but in the end it was Oracle that said it had snapped up Sun two weeks ago, for $US7.4 billion.

Sun's revenue for the quarter was $2.61 billion, it announced on Tuesday, down 20 per cent from a year earlier and below the $2.86 billion that financial analysts had been expecting, according to Thomson Reuters.

Its net loss was $201 million, or $0.27 per share, wider than last year's loss of $34 million, or $0.04 per share. This year's figure included a restructuring charge of $46 million, related mostly to the 5000 to 6000 layoffs that Sun announced in November.

See how events have unfolded for Sun this year here.

Sun executives made no comment on the quarter in the company's press release and said Sun would not be holding a conference call to discuss the results, presumably because of the pending acquisition.

The company's financial performance has been uneven for the past several years, and lately it has struggled to increase sales or turn a profit. It has now posted losses for four of the past five quarters and its revenue has declined each time.

Sun counts several financial services companies among its largest customers and thus was hit earlier than most by the current recession. It had reportedly been seeking a buyer for several months until Oracle stepped in on April 20 and said it would buy the company. Prior to that it was said to have been close to a deal with IBM, but the talks broke down over price and possibly other terms.

Oracle was seen by some as an unlikely savior given its focus on software, and the deal raises questions about what Oracle plans to do with Sun's hardware business after the deal closes this summer. Some analysts expect Oracle to try to sell off Sun's server and chip businesses, while others say it could use them to build more high-end database appliances, along the lines of the Oracle Database Machine it designed with Hewlett-Packard last year.

Oracle has said it was most interested in Sun's Java and Solaris businesses. It also says it will act quickly to make Sun's businesses profitable, which analysts say could mean cutting as many as 10,000 jobs.

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James Niccolai

IDG News Service

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