A confluence of difficulties have caused high-flying Sun Microsystems Inc to stumble, and the Mountain View, California company warns that net profit for its fiscal fourth quarter to June 30 will be significantly below the results for the like quarter a year ago, when it did $31m net, 38 cents a share, and that things […]
A confluence of difficulties have caused high-flying Sun Microsystems Inc to stumble, and the Mountain View, California company warns that net profit for its fiscal fourth quarter to June 30 will be significantly below the results for the like quarter a year ago, when it did $31m net, 38 cents a share, and that things could be so dull that it may report a small loss. Analysts were thoroughly wrong-footed by the announcement – they had been going for between 33 cents and 40 cents a share for the period, and the shares lost $1.25 to $20.75 in after hours trading, and lost another $1.75 when the market opened on Friday. Whether or not the company makes a loss depends on the volume of business it gets away by the end of this month, and it says that sales will be below recent expectations and could fall below the $497m level of the third quarter to March 30. Sun blames to key factors – embarrassingly for a company that makes its living from offering to solve other companies’ problems with its computers, it says that conversion to a new management information system in April was not without difficulties, typical of projects of this magnitude, and that this slowed production early in the quarter. The company’s other problem is that the introduction of five major new products last month has, it says, made forecasting product mix for manufacturing more difficult. Moreover, although acceptance of the new products in the market has been very good and the company expects to ship about 8,000 units of the new products in the current quarter, the production ramp for these products is being somewhat impaired by an insufficient supply of certain components – Sun doesn’t say which. New product manufacturing delays have also resulted from continued strong sales of Sun’s traditional products, causing unexpected production demands. These factors have hindered Sun’s ability to assess accurately the company’s incoming orders, to forecast and to schedule production efficiently it says. Market gossip has it that its hottest new property, the Sparcstation 1, will be very late. But it reports that backlog and incoming order rates remain strong, and says it believes the consequences of its problems will be confined to the current – fourth – quarter and therefore is not encouraging any changes in expectations for fiscal 1990, which it believes will be an excellent year. Nevertheless, all the signs are that Sun is suffering from the after-effects of its meteoric rise, which has seen employment grow to 9,000 from 1,200 ove the past five years, and that it is suffering the usual hiatus as entrepreneurial management tries to acquire quickly the quite different skills needed to run a large company that is diversifying – and the problem with these short term setbacks is that they have a nasty habit of extending into the medium term – witness Friday’s news from Nixdorf Computer.