Sun expects bad quarter, stocks take a hit
The stock tickers Tuesday morning are just long stretches of red text with downward arrows, and Sun Microsystems said its numbers for the quarter will follow this downward trend.
On Monday, Sun released its preliminary results for the first quarter of fiscal year 2009, preparing investors for a larger drop than had been previously anticipated. The original revenue forecast for Sun was $3.14 billion, but the company estimates the actual numbers will fall between $2.95 -$3.05 billion, or a loss of between 25¢-35¢ per share.
In a statement, Sun CEO Jonathan Schwartz said, "Sun and its customers are seeing the impact of a slowing economy." He maintains, however, that Sun presents cost-effective and eco-efficient resources that can actually help customers lower their tech spending.
Schwartz has been citing the weakened US economy as the main cause of Sun's diminishing revenues. After its acquisition of MySQL, there were rumors that Sun could lay off as many as 2,500, Schwartz issued a statement saying, "The US economy presented Sun with significant challenges in the third quarter."
Before the opening bell this morning, Sun's shares fell in value 14% and is expected to continue its drop. The company's shares have been in decline since its shareholders approved a one-for-four reverse stock split in November 2007. Reverse stock splits reduce the number of shares issued to proportionately increase their value. Some analysts believe the action to be a last-ditch effort for companies to maintain their numbers.
Sun will officially announce its earnings on October 30.