Sun blames revenue drop on weak US economy

With its US$1 billion acquisition of MySQL now behind it, Sun reported financial results on Thursday that show the company is still struggling to boost its revenue.

The server vendor also said it plans to cut as many as 2,500 jobs -- about 7 percent of its workforce -- over the next three months.

Revenue for Sun's third fiscal quarter, ended March 30, was $3.27 billion, down 0.5 percent from the same quarter last year. Weighed down by costs associated with the MySQL acquisition, the company reported a loss for the period of $34 million, or $0.04 per share, based on generally accepted accounting principles (GAAP).

The company said it was doing well in emerging markets like India and Brazil, but things were not so rosy in the U.S.

Sun blamed the U.S. economy, rather than competitors, for the poor results. "Our third quarter was a challenging one in which U.S. macro factors ... overshadowed the progress we made in other parts of the world," CEO Jonathan Schwartz said in a conference call. "I'm disappointed."

Sun's computer systems and storage groups both missed internal expectations by $100 million, with sales particularly flagging at the high end of the product lines. In the U.S., the economic slowdown hit orders from government, retail and telecommunications customers, Schwartz said.

The bad results seemed to take financial markets by surprise. Sun's stock [JAVA] dropped more than 14 percent, dipping below $14 in after-hours trading on Thursday evening.

Its MySQL and Innotek acquisitions added 1,100 new employees during the third quarter, but Sun now plans to cut jobs before the end of the fiscal year. It expects to save between $100 million and $150 million per year by cutting between 1,500 and 2,500 jobs in the fourth quarter, said Michael Lehman, Sun's chief financial officer.

Sun shipped about 80,000 servers during the quarter, a jump of 6 percent from the third quarter a year ago. About 30,000 of those servers were x64 systems, up 26 percent from the previous year.

Sun closed its purchase of open-source database vendor MySQL at the end of February. Sun hopes the deal will help grow its revenue by opening doors at companies that are not yet Sun customers.