Pressure on Sun Rises as Earnings Continue Slide

By Matthew Hicks  |  Print this article Print


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The company must prove that recent operations and strategy shifts will pay off, or it risks eroding its stature further as a leading tech company, analysts say.

After posting another quarter of poor earnings, Sun Microsystems Inc. faces more pressure than ever from both shareholders and IT customers to prove that it can recover the position it once held as a prospering computer company, technology analysts said on Thursday.

While Sun has begun taking many of the right strategic and business operations steps to recover from its slump, analysts said the Santa Clara, Calif., company still must prove that such changes as greater support for x86-based systems and the settling of its long-standing feuds with Microsoft Corp. can improve its financial picture. On Thursday, the company posted a loss of $760 million for its fiscal third quarter on revenues of $2.65 billion.

"The bottom line is, wherever it comes from, Sun's running out of time to prove that [it] can make money," said Gordon Haff, a senior analyst at Illuminata Inc., of Nashua, N.H. "They haven't run out of time yet, but there is a recovery going on and others companies are doing better, but Sun is not."

Analysts agreed that Sun, despite growing financial losses, is far from bankruptcy or insolvency. The company has billions in cash and has taken steps to shore up business. The biggest was its $1.6 billion settlement of antitrust and patent issues with Microsoft, an agreement reached earlier this month that included plans for the two companies to collaborate on technology.

"Sun and its product lines will be around for a long time no matter what happens to Sun as a corporation," said Dana Gardner, a senior analyst at The Yankee Group, in Boston. "Sun might have to shrink and reconstitute itself, but there's not too much risk of it going away."

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Matthew Hicks As an online reporter for eWEEK.com, Matt Hicks covers the fast-changing developments in Internet technologies. His coverage includes the growing field of Web conferencing software and services. With eight years as a business and technology journalist, Matt has gained insight into the market strategies of IT vendors as well as the needs of enterprise IT managers. He joined Ziff Davis in 1999 as a staff writer for the former Strategies section of eWEEK, where he wrote in-depth features about corporate strategies for e-business and enterprise software. In 2002, he moved to the News department at the magazine as a senior writer specializing in coverage of database software and enterprise networking. Later that year Matt started a yearlong fellowship in Washington, DC, after being awarded an American Political Science Association Congressional Fellowship for Journalist. As a fellow, he spent nine months working on policy issues, including technology policy, in for a Member of the U.S. House of Representatives. He rejoined Ziff Davis in August 2003 as a reporter dedicated to online coverage for eWEEK.com. Along with Web conferencing, he follows search engines, Web browsers, speech technology and the Internet domain-naming system.

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