Sun Micro narrows first-quarter loss

/ Source: The Associated Press

Sun Microsystems Inc. returned to a loss in its fiscal first quarter as the server and software maker paid for its recent restructuring efforts and a settlement with Eastman Kodak Co.

For the three months ended Sept. 26, Sun lost $174 million, or 5 cents per share, compared with a loss of $286 million, or 9 cents per share last year. For the second consecutive quarter, Sun's revenue increased, from $2.54 billion last year to $2.63 billion (euro2.12 billion).

Analysts were expecting the Santa Clara-based company to lose 3 cents per share on sales of $2.7 billion, according to a survey by Thomson First Call.

The loss includes charges of $108 million for previously announced restructuring, $82 million for a recent settlement with Kodak over Sun's Java technology and a $4 million loss on investments. It also includes a $7 million tax-related gain.

Excluding those items, Sun's profit would have been $13 million.

"The first fiscal quarter is usually our toughest but the management team executed well operationally," said CEO Scott McNealy.

In July, Sun posted its first profit in three years — $795 million, or 24 cents per share, on sales of $3.11 billion. Much of that, however, stemmed from the company's April settlement with Microsoft Corp. In September, Sun adjusted its net income downward by $12 million.

During the 1990s, Sun servers powered by its Sparc microprocessors and Solaris operating system were the systems of choice for cash-rich dot-coms and other booming companies.

But Sun, which had seen its stock soar to $64 per share in 2000, was particularly hard hit when the tech bubble busted. Its business also suffered as low-cost hardware and software became more powerful, and it was slow to react to the market shift.

Recently, it has made moves to offer competitive systems based on Advanced Micro Devices Inc.'s Opteron microprocessors as well as the open source and inexpensive Linux operating system. At the same time, it's trying to position its Solaris operating system as a more cost-effective alternative to Linux.

Critics point out that Sun's various strategy has yet to pay off with regular profits.

Sun's share price is down more than 15 percent from the start of the year.