Sun profits tank after sluggish demand in finance sector


Sun profits tank after sluggish demand in finance sector

Microscope contributor

Sun Microsystems recorded a $1.7bn (£1.04bn) loss for its first fiscal quarter 2009 after writing down the value of the company and enduring slowing demand among enterprise customers in Europe and North America.

Revenues for the three months ended 28 September dipped 7% to $2.99bn and the loss included a $1.445bn non-cash charge for goodwill impairment and $63m in restructuring costs. This compares to a profit of $89m a year earlier.

"The economic downturn continued to weigh on our customers, especially those that contribute to our traditional high-end businesses," Sun CEO Jonathan Schwarz said in a statement.

In a conference call with analysts he argued the slowdown was due to the credit crunch rather than a general aversion to Sun.

"When I talk to customers I don't hear them saying 'We decided not to buy you, we've gone with another vendor'," he said. "I tend to hear 'I'm sorry, we have a credit crisis and a liquidity problem and we are trying to raise capital'."

Sales in North America and Europe were down 12% and 8% respectively, with the combined regions constituting 73% of total revenues.

A slowdown in spending in the finance sector was particularly evident in the northeast of the US and in the UK, which registered the greatest drop in Europe.

Looking ahead, Schwarz was sanguine about the prospects for Sun as more businesses considered open source "as a vehicle to escape proprietary vendor pricing", a sector where the vendor is looking to lead.

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