Sun warns of layoffs, earnings shortfall
Published: 05 Oct 2001 15:18 BST
Sun Microsystems said Friday that it will lay off 9 percent of its workforce and that its first-quarter results will miss estimates.
Sun now expects a first-quarter loss of between 5 cents and 7 cents a share, and revenue in the range of $2.7bn to $2.9bn (£1.9bn to £2.03bn). First Call's consensus estimate indicated that Wall Street was expecting the computer systems maker to report a loss of 4 cents a share on $3.29bn in revenue.
Sun blamed consolidation in the computer industry and, in keeping with a number of other tech companies, the 11 September terrorist attacks for its reduced estimates and layoffs. "The events of 11 September have impacted us all," Chairman and chief executive Scott McNealy said in a company release. "Things were tough with the economy before, but now we are facing increasing uncertainties both in the US and globally."
Expectations for Sun's quarter, ended 30 September, were already low following the company's midquarter conference call in August. At that time, Sun said low sales in Europe and Japan made a first-quarter profit unlikely. Management refused to comment on revenue expectations, though chief financial officer Michael Lehman had said at the time that "it's going to be a real stretch to meet that $3.7bn number."
Before the midquarter update, analysts had expected the company to turn a profit of 2 cents a share on sales of $3.7bn.
Sun also said Friday it will take a charge of around $500m in the second quarter due to its layoffs.
Analysts had been speculating that the company would lay off workers. Sun announced in July that it would cut around 300 jobs by the end of the year.
"In light of a somber outlook for both IT and telco spending, it is becoming likely, perhaps certain, that Sun will lay off employees," Bernstein analyst Toni Sacconaghi said in a Thursday note to clients.
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