Sun Microsystems Inc. warned of a deep quarterly loss and a possible charge for the diminished value of acquisitions, the latest sign of the economic slowdown's toll on the computer industry.
The Silicon Valley company sells server systems against rivals that include International Business Machines Corp. and Hewlett-Packard Co. Amid the competition and an anemic economy, Sun has struggled to increase sales this year and announced plans to slash jobs.
Sun's projection Monday, which analysts said equals a quarterly loss between $185 million and $260 million, suggests conditions may be worsening. "Sun and its customers are seeing the impact of a slowing economy," said Jonathan Schwartz, Sun's chief executive officer, in prepared remarks.
Sun's shares fell more than 5% to $5.47 in after-hours trading following the news. Sun's stock traded at 4 p.m. on Nasdaq Stock Market at $5.71, up 13 cents.
Sun also said it is reviewing the goodwill on its books, and will likely have to book an impairment charge given the current economic environment, Sun's results and "a sustained decline in Sun's market valuation."
Goodwill reflects the reputation or other value of a business beyond its tangible assets, and is usually associated with the price paid for acquisitions. As of Sept. 28, Sun said its total goodwill balance was $3.2 billion, of which $1.8 billion relates to reporting units that may be impaired.
A Sun spokeswoman said the largest component of the affected goodwill balance relates to Storage Technology Corp., which Sun agreed to buy in 2005 for $4.1 billion.
Louis Miscioscia, analyst with Cowen & Co., said the troubled financial-services industry is hitting Sun particularly hard, since the company has traditionally had many customers in the sector.
A Sun spokeswoman declined to make executives available for comment. But Mr. Schwartz added in his prepared remarks that the company believes it is "positioned to offer the kinds of products that can radically help customers reduce expenditures for their infrastructure."
The Santa Clara, Calif., company put its net loss for the quarter ended Sept. 28, including a $60 million charge for a restructuring announced in August, at 25 cents to 35 cents a share. The company estimated revenue would range from $2.95 billion to $3.05 billion, down from $3.22 billion a year ago.
