Sun Micro loss deepens prior to acquisition

BOSTON (Reuters) - Computer server maker Sun Microsystems JAVA.O reported a wider quarterly loss as sales fell because of lower technology spending and uncertainty over the company's future.

Analysts said Sun's business was hurt in the last few weeks of the quarter by news that it was in talks to be acquired by IBM IBM.N, prompting some customers to hold off on making purchases until they knew the outcome.

Oracle ORCL.O later swooped in and agreed to buy Sun for more than $7 billion (4.76 billion pounds), a deal that was announced April 2.

Revenue fell 20 percent to $2.61 billion in Sun’s fiscal third quarter ended March 29, compared with the average analyst forecast of $2.85 billion, according to Reuters Estimates.

Businesses were hesitant to buy Sun’s computers out of concern that it might not be around to service that equipment if the unprofitable company failed to sell itself, analysts said.

“There was probably some pressure from the IBM saga that impacted the top line,” said Cross Research analyst Shannon Cross. “It would have made it hard to close the quarter.”

Excluding restructuring charges and related impairment of long-lived assets, Sun lost 21 cents per share in the quarter, compared with the loss of 19 cents a share expected by analysts, according to Reuters Estimates.

Computer sales dropped 29 percent to $1 billion, while storage equipment sales fell 20 percent to $425 million. Software sales rose 27 percent to $187 million, while services revenue fell 13 percent to $1.1 billion.

Gross margin shrank 2.2 percentage points from a year earlier to 42.7 percent.

Sun reported a net loss of $201 million, or 27 cents per share, versus a year-earlier loss of $34 million, or 4 cents.

The shares of the Santa Clara, California-based company were quoted at $9.14 in extended trade, down slightly from their Nasdaq close of $9.16.

Shares of Redwood City, California-based Oracle were quoted at $19.66 in extended trade, down from their Nasdaq close of $19.74.

Oracle spokeswoman Deborah Hellinger declined comment on Sun’s results. The company is not holding a conference call with analysts.

Reporting by Jim Finkle; Editing by Steve Orlofsky and Matthew Lewis