Sun Microsystems Inc, whose server computers run networks and Internet sites, said orders are lower than expected so far this quarter, making it difficult for the company to meet its sales target and break even.
"It would take a very large month of September for us to hit the break-even point," said Chief Financial Officer Mike Lehman. "I'm not counting on it. I just don't think it's realistic at this point.''
The shares fell as much as 6.5 percent. Lehman declined to give a sales forecast for the first quarter ending next month. In July, the Palo Alto, California-based company said sales would be more than US$3.7 billion, the point at which Sun would break even before acquisition costs.
Sales in Europe and Japan are below expectations, with US revenue coming in close to forecasts, Lehman said. In the quarter ended in June, Sun reported its first sales drop since at least 1992 as customers reduced spending on servers, storage gear and software.
"That doesn't bode well for the upcoming earnings season," said Bill Rutherford, whose Rutherford Investment Management owns 25,000 Sun shares. "We were hoping for some more signs of stabilization. We're getting further erosion." The company is expected to have profit of US$0.2 a share on sales of US$3.8 billion for the first quarter, the average analyst estimates in a Thomson Financial/First Call survey. A year earlier, Sun had profit of US$0.15 on sales of US$5.05 billion.
Sun said it will end the quarter with 500 fewer employees. The company, which has more than 43,000 workers, also has asked employees to take vacation days by year's end to pare costs.
The company has suffered this year as trouble at telecommunications and Internet customers quashed demand for computer equipment, software and storage products. Last year its customers drove sales growth of 35 percent or more for four straight quarters.
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