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Sun sales plummet 30.6% in Q4

What? You didn't think we'd notice?

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If the impending acquisition of Sun Microsystems by Oracle was meant to be reassuring to Sun's customers and to stabilize its sales, that sure didn't work. Not with revenues down 30.6 per cent to $2.62bn and the company posting a $147m net loss in the fiscal fourth quarter ended in June.

After the market closed on Friday, Sun snuck out its fourth quarter and year-end fiscal 2009 numbers. No conference call. No press release with a statement. Just some tabular data and - if you look for it online at the SEC's Edgar system - a presentation management would have otherwise discussed if Oracle hadn't muzzled the company as it awaits approval from the European Commission's antitrust authorities to close the $7.4bn Sun deal (which worked out to $5.6bn net of Sun's cash and debts when the deal was announced in April).

The Q4 numbers were as bad as Sun had warned Wall Street they would be two days ahead of the vote by Sun's shareholders back in mid-July to approve the deal or not. But losses for the fourth quarter were not as bad as might have been expected because Sun has slammed on the sales and marketing brakes bigtime, cutting deeper than it had already done in the third quarter.

Sun's top brass and its shareholders don't have a better option than to throw the company at the tender mercies of Larry Ellison into the gaping maw of Oracle, and thus they approved the takeover on July 16, but with only 62 per cent of the shares outstanding voting for the deal. The irony, of course, is that the Oracle deal - and the huge uncertainty that surrounds it in terms of current and future hardware product lines - is what has hammered Sun's sales in the two most recent quarters, pushing Sun into the red.

If Sun hadn't started shopping itself around last November, had cut costs a little deeper than it might have otherwise wanted to, and stuck to its server and operating system knitting, Sun might be at break-even or even marginally profitable. All by its lonesome.

But that is not the way that president and chief executive officer, Jonathan Schwartz, played it. And Sun's employees, shareholders, and customers will suffer until Oracle gets regulatory approval for the deal from the Europeans - and very likely after that as Oracle sorts out the hardware and software lines and makes the cuts that Sun's own managers were unwilling to do to make Sun profitable. The annoying thing is that Sun sure did show a certain flair for cost cutting in Q4.

If Sun had spent as it did in fiscal Q3, its losses would have ranged from $179m to $253m on sales ranging between $2.58bn to $2.68bn, the guidance it gave back on July 14. But even with $64m in restructuring charges and $15m in impairment of goodwill, Sun only lost $147m in the fourth quarter.

Where was this cost cutting when Sun needed it one, two, or three years ago? Sun always hoped it could grow its way back to profits, that's where.

The June quarter is traditionally Sun's best, given that it is the company's year end and sales people are motivated to close strong to get their bonuses. But Sun's hardware and software sales continue to slide in Q4, even lower than levels in the third quarter. Only by a minor bump up sequentially in services, to $1.14bn, was Sun able to squeak out sequential growth. That said, computer products sales fell by 37.9 per cent year-on-year to $1.48bn, and services revenues dropped by 18 per cent to $1.14bn.

For the full fiscal 2009 year, Sun's server, storage, and software sales fell by 22.2 per cent to $6.7bn and services sales (which includes the very lucrative support contracts for the Solaris operating system) declined by 9.8 per cent to $4.75bn.

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