Sun Microsystems posts $1.7-billion Q3 loss

Silicon Valley networking giant and maker of business software Sun Microsystems posted a whopping loss of $1.7 billion, citing a 7 per cent drop in sales due to the economic downturn which stalled customers buying its high end products and a goodwill impairment charge that cost the company $1.45 billion and hinting at possible layoffs.

A year ago Sun made a profit of $89 million but this quarter sales slipped to $3 billion down from $3.219 billion in the same period a year earlier. Its $2.24 loss per share was considerably larger than what analysts expected at 8 cents a share on $3.06 billion in sales.

Since the past four months there has been wide speculation on the company and according to media reports, after the announcement of its results there were widespread rumours that the company would put itself for sale and in August this year there were rumors of a takeover. (See: Sun Microsystems a takeover target: report)

This week it had to cope with the sudden departure of billionaire, Andreas von Bechtolsheim, Sun's co-founder and chief scientist and highly regarded systems designer, who left to join a startup he founded, Arista Networks, as its chief development officer. (See: Sun loses co-founder and chief scientist Andy Bechtolsheim to startup Arista Networks)

The company pulled back its annual operating margin forecast to 28 per cent, down from a prior estimate of 28.5 per cent to 29 per cent and said it will release the new forecast only if it can increase software and service revenue but also said the economic outlook was too uncertain to give a software sales forecast.

"Although we saw another quarter of growth in our Solaris-based Chip Multi-Threading and Open Storage systems, the economic downturn continued to weigh on our customers, especially those that contribute to our traditional high-end businesses," said Jonathan Schwartz, CEO of Sun Microsystems.