Sun Microsystems Inc shares declined 18 percent after the server-computer maker said it's unlikely to meet first-quarter sales targets as demand outside the US lags expectations.
The shares fell US$2.36 to US$11.07 today after touching US$10.40, their lowest point since December 1998. Trading of 148.7 million shares made it the most-active stock in US markets. Sun has dropped 83 percent in the past year.
Sun Chief Financial Officer Mike Lehman late yesterday said orders are below forecasts, which will make it difficult for the company to break even. Investors who were anticipating a turnaround this quarter are now concerned that there's no end in sight to an economic slowdown that's hurt sales of computer-related products at Sun, Microsoft Corp, Intel Corp and rivals.
"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 shares of Microsoft, the biggest software maker, slid US$3.31 to US$56.94. International Business Machines Corp, the largest computer maker, dropped US$3.77 to US$100.36. Intel, the biggest chipmaker, fell US$0.97 to US$27.13.
The Standard & Poor's Computer Systems Index sank 22.97, or 4.5 percent, to 490.76. The NASDAQ Composite Index dropped 51.50, or 2.8 percent, to 1791.67.
Lehman declined to give a specific sales or profit estimate for the period ending next month. In July, Sun said sales would be more than US$3.7 billion, the point at which the company 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 equipment and software.
To cope with the slowdown, Chief Executive Scott McNealy has realigned his sales force to focus on the health-care, retail, automotive and energy industries. He wants to reduce inventory levels, trim more costs to bolster profit and improve the company's storage products.
The Palo Alto, California-based company was expected to have profit of US$0.02 cents 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.
The company said yesterday it will cut 500 employees by the end of the quarter.
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