Sun posts first quarterly loss in 12 years

For the first time in twelve years, hardware, software and services provider Sun Microsystems posted a loss for the fourth quarter yesterday, sighting the continued decline of IT spending by European and Asian companies as a major factor.

For the quarter ended June 30, Sun reported a net loss of $88 million, or three cents per share, which includes a $78 million loss on the company’s venture-equity portfolio and acquisition-related charges.

Revenues for fourth quarter 2001 were $4 billion, compared with $5.02 billion year over year. In addition, pro forma net income for fourth quarter 2001 was $134 million, compared to the $717 million earned for the same period a year ago. Pro forma earnings for the quarter were 4 cents per share, down 17 cents from the previous year.

Although Sun has steered clear of layoffs—maintaining its head count of about 43,000 employees—and inventory write-downs, the company has enforced cost-cutting measures to ensure profitability. During the company’s Web-cast yesterday, the company said it reduced selling, general and administrative expenses by 10 percent in the quarter, while simultaneously increasing research and development investment by 17 percent.

Sun plans to continue R&D investments, a core element to their competitive advantage, said Scott McNealy, chairman and chief executive for the company. “We are focused on building a company for the long term and are willing to make a tradeoff between short-term profitability and long-term investments to improve our competitive position.”

The company spent $543 million on R&D in the quarter.

Even with the downturn in the market, Sun is generally pleased with the company’s performance during the quarter, said Ed Zander, president and chief operating officer. Zander pointed to certain highlights of the quarter, including the company’s 14 percent in U.S revenues, its 33 percent increase in services revenues, and its 44 percent increase in professional services revenues.

“As we enter our new fiscal year, we’re confident that Sun is more competitively positioned in the market than we were a year ago with products, technologies, field sales services and with our partners,” he said.

Sun plans to move into the next quarter with continued growth in market share, new products in the areas of service, storage and software, and continued cost containment.