Sun Microsystems warned last night of a worse-than-expected first-quarter loss that led it to record a $1 billion tax charge and revise its fourth-quarter results to show a loss.
Shares in Sun, a maker of powerful network computers used widely by telecommunications and financial services companies, fell some 10 per cent in after-hours trading in reaction to the warning and the revision.
Sun said it would take the $1.05 billion charge to write down the value of tax credits carried on its balance sheet because of its slower return to profitability. The high-tech recession has been harder on Sun than on rivals, who have undercut Sun with cheaper computers that use industry-standard components.
The deferred tax assets include carryforwards from prior losses and tax credits, including credits for research and development, a Sun spokesman said.
Tax carryforwards are used to offset future taxable income, allowing a company to spread out its tax burden by matching losses against profitable quarters.
Analysts have said that Sun is getting squeezed on the high-end server market by Hewlett-Packard and IBM, and on the low end by Dell.
Sun said it now expects a fiscal first-quarter net loss of between 7 cents per share and 10 cents per share, including a tax provision of about $34 million, or 1 cent per share.
For that quarter, Sun said it will now have a net loss of $1.04 billion, or 32 cents per share, after taking a $1.05 billion noncash charge to boost a valuation allowance for net deferred tax assets.