Sun posts $2.3bn loss

But one-time charges aside, business wasn't so bad...
Written by Stephen Shankland, Contributor

But one-time charges aside, business wasn't so bad...

Server maker Sun Microsystems reported a net loss for its most recent quarter of $2.28bn yesterday, most of it a $2.13bn non-cash charge relating to the reduced value of acquired companies. Excluding the goodwill impairment charge and several other one-time expenses, the Santa Clara-based company would have reported $10m in net profit for the quarter, ended 31 December, compared with a $99m net loss in the year-ago quarter. Revenue decreased 6 per cent to $2.9bn, from $3.1bn a year ago. The company had warned in September of a possible goodwill impairment charge of as much as $2.2bn. Including the charges, Sun reported a loss of 72 cents per share. Excluding them, the company broke even. The breakeven per share result is 2 cents better than analysts polled by First Call had forecast. The $2.9bn in revenue matched the expectation. Sun, a stock market darling in the 1990s, has been grappling with increased competition, decreased demand and deeper price cuts in its sales of higher-end computers. To return to profitability, the company has been cutting expenses, an effort that has included a 4,400-employee layoff that began in the autumn. The stock market drop has taken its toll on acquiring companies. AOL Time Warner thus far has seen the biggest charge, $54bn. About $1.6bn of Sun's goodwill impairment charge was from the acquisition of Cobalt Networks, which cost Sun $2bn in stock in 2000, with a further $363m resulting from Sun's HighGround buyout in 2001, which originally cost $400m in stock. In addition to the goodwill impairment charge, Sun recorded an $11m expense for loss of investments; a $4m expense for research and development; and a $204m tax benefit related to the three charges. Sun didn't offer projections for coming quarters, other than cautioning analysts to expect increasing tax and pay rise expenses. Further muddying the crystal ball, the company announced it is ceasing mid-quarter financial updates because it's too hard to predict results in an uncertain economy. Sun's top-end and high-volume servers did well in the quarter, said chief strategy officer Mark Toliver. At the high end, Sun Fire 12k and 15k servers "showed strong growth" compared with the previous year and the previous quarter, he said, while shipments for the newer four-processor v480 server "ramped very strongly". Sun has had "33 straight quarters... of positive cash flow from operations", CEO Scott McNealy boasted on a conference call. "Cash is king." Stephen Shankland writes for CNET News.com.
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