Sun Micro: Crumbling Continues; FY Q1 Revs Drop 25%

Sun Microsystems (JAVA) this afternoon slipped out the latest evidence of the rapid erosion of the company’s business while it waits for EU approval for the pending acquisition by Oracle (ORCL).

For the fiscal first quarter ended September 27, Sun posted revenue of $2.24 billion, down 25% from a year ago, and off 14.5% sequentially. Product revenues were down 32% year-over-year to $1.19 billion, with a sequential drop of almost 20%.

Sales on a year-over-year basis were down 19% in North America, down 29% in Europe, down 33% in emerging markets and down 23% in Asia-Pacific.

Sun posted a net loss for the quarter of $120 million, or 16 cents a share; on a pro forma basis it actually managed a profit of 2 cents a share.

One bright spot: a pick up in gross margins, which rose to 43.4%, from 40.2% a year ago, and 40.5% in Q4; also note that operating expenses were down 16% sequentially, and 62% year over year.

In a 10-Q filing with the SEC, the company painted a grim picture of current demand.

“We are still seeing the results of IT budget cuts instituted last year by our largest customers due to the economic downturn, especially in the financial services sector, in addition to the consolidation of our customer base,” the company said. “Across all sectors, non-critical projects are on hold. Revenue was also negatively impacted by the uncertainty associated with our proposed acquisition by Oracle and increased competition. Support Services revenue decreased primarily as a result of customers seeking higher discounts, delays in service contract renewals and strong competitive pressures. Professional Services revenue decreased primarily due to decreased sales in our Systems business as these sales create opportunities to perform architectural, implementation and optimization services.”

JAVA shares closed today down 13 cents, or 1.6%, to $8.10. The company has agreed to be acquired by Oracle for $9.50 a share.