Yesterday, Sun Microsystems
While this is a non-cash charge, the move signals a weaker outlook. The deferred tax assets are used to offset future taxable income. So, by taking the charge in the fourth quarter, Sun suggests that it is not confident in a high level of future profitability -- a possible indictment on the bullish thesis for increased technology spending.
Accordingly, Sun now expects a fiscal 2004 first quarter GAAP loss of $0.07 to $0.10 per share, compared to the analyst estimate of a $0.02 loss. Included is a tax provision worth $34 million, or about a penny per share.
Sun's equipment running its Unix operating system has suffered from increasing competition on all fronts. Newer competitors such as Dell Computer
Squeezed at both ends, Sun's competitive position has dramatically decayed in recent years. Watch its competitors for signals -- if these guys show top-line improvement and better margins in their operating system divisions, it may well be that Sun just blinked at the wrong time.
Shares of Sun Microsystems are down 15% to $3.29 midday.
Jeff Hwang can be reached at [email protected]