Never look directly at the sun with the naked eye... good advice. Here's some more good advice: If you're thinking of bottom-fishing, be wary of looking at this (former) star as well.

Sun Microsystems (NASDAQ:SUNW) delivered some bad news yesterday: a $760 million net loss for the third fiscal quarter, representing $0.23 per share. A year ago, the company made a paltry $4 million, which basically represented zero cents per share.

And the news gets worse. Revenues for the year-ago quarter were $2.79 billion; this quarter, the revenues were $2.65 billion, a 5% reduction. Plus, total gross margin was around 40.3% of the revenues for this quarter; a year ago, it was over 4% higher. Of course, with the exclusion of a few items -- such as a charge for restructuring initiatives -- the net loss becomes $260 million, or $0.08 per share. But alas, a loss is a loss.

Declining revenues. Declining margins. Net loss. A pretty tenebrous trifecta if you ask me.

Sun was one of those tech darlings of the recent yesteryear that nearly everyone loved and respected and believed in; along with companies such as Microsoft (NASDAQ:MSFT) and Oracle (NASDAQ:ORCL), it powered the imaginations of investors who believed they would never peak or plateau.

This chart imposes a bit of reality, though. We Fools know that long-term buy-and-hold strategies are important components of a diversified portfolio; however, one must remember that the story for a stock must remain the same, or improve, for it to remain a vital and viable investment.

Sun's story has arguably changed, and not for the better. It just doesn't seem to have adapted well over time to the changing competitive landscape, and the market's reaction to it has efficiently captured its desultory state. A look at the current Investor's Business Daily ratings on earnings, sales growth, and management of assets shows some pretty last-of-the-class values. And the relative strength informs us that this former totem of the growth funds no longer has any solar wind behind its sails.

Even with the recent settlement with Microsoft, Sun's future doesn't look bright -- this latest earnings report just doesn't offer an investor any confidence in the company. A recent commentary paints a detailed defense of Sun and its prospects, and brings up some solid points. In my opinion, though, at the very least, proactive caution is advised in this case.

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Fool contributor Steven Mallas owns no shares in any of the companies mentioned in this piece.