"Sun has outperformed Wall Street's expectations in five of the past six quarters, and it last missed an earnings estimate in 2005. Let's see whether the streak can stretch further."
-- Me, two days ago
Well, it couldn't. Sun Microsystems
The enterprise computing specialist lost $34 million, or $0.04 per share, on revenue of $3.3 billion. The sales slowdown was hardly a surprise, given Sun's recent history of decelerating revenue growth, but the net loss was a shocker. Sun made a profit of $0.07 per share a year ago, and seemed to have settled down in a predictable profit pattern.
Ponytailed CEO Jonathan Schwartz explained the underperformance with macroeconomic "challenges" in the United States. Sales actually improved over last year in 12 of the 16 sales regions that Sun tracks, including double-digit gains in biggies like Europe, South America, and India. But it wasn't enough to balance out a 10% domestic drop, as the hometown market is the biggest component in Sun's results.
Now, all is not lost. Sun still generated $1.24 billion in operating cash flow, up from a measly $394 million a year ago. Not that it's helping investors today, who are stuck with a split-adjusted share price digging into five-year lows.
So is this an overreaction of epic proportions by Mr. Market, akin to the fire sales we've seen recently on excellent businesses like VASCO Data Security
While a serial hit-and-miss innovator like Google
Pick a path, Jonathan. You're not strong enough to go for multiple markets -- that's a classic example of "diworsification."
Fool contributor Anders Bylund is a Google shareholder, but holds no other position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure knows exactly what it's doing.