Sun revenues sink 13%

23 July 2003 Sun Microsystems’ stock tumbled by a fifth today after it unveiled another lacklustre set of quarterly and full year financial figures.

Revenues for the fourth quarter to the end of June, traditionally Sun’s strongest quarter, fell by 13% to $2.98 billion, while net income weighed in at $12 million, down from $61 million achieved in the same period a year earlier.

For the full 2003 fiscal year, Sun revenues fell 8.5% to $11.4 billion and the company reported a net loss of $2.38 billion, largely related restructuring charges and write-offs on acquisitions amounting to some $2.13 billion.

The fourth quarter figures fell well below expectations and Sun’s stock price consequently fell by 18% in trading today — an indication of shareholders’ dismay at Sun’s continuing disappointing performance.

“We reached profitability in the second half of the year, but we weren’t [profitable] for the whole year and we didn’t grow the business. That’s something we’re not happy with and we’ve got all our attention focused on it,” said CEO Scott McNealy.

However, there were a number of bright spots. Costs were reduced by $477 million in 2003 compared to fiscal 2002 and the company generated some $1 billion in cash.

But the scale of the challenges that Sun is facing are all too clear. Most notably, it has been slow to devise a strategy to deal with the threat of Linux at the low-end. As a result, it has seen servers based on the open source operating system erode its market share more comprehensively than anything from rival Microsoft.

Sun belatedly adopted Linux, but made a poor start when it decided to offer its own distribution of Linux, instead of a more mainstream offering.

On top of that, Sun still has to get to grips with its software business, which has been put together at great expense, but is struggling to challenge for market leadership in any sector.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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