Sun Microsystems Inc’s hopes that its dip into losses for its fiscal fourth quarter would be short-lived are unlikely to be met according to an investigation of the company conducted by the Wall Street Journal. Among the problems now besetting the company, perhaps the most frustrating is that it underestimated demand for the new low-end Sparcstation-1 by at least a factor of 10: the paper quotes an insider saying that the shortage of colour monitors for the machine is so acute that the company is unable to fill many orders. But the problem is aggravated by the fact that customers switched orders for the 68030-based Sun-3 and the 386i machines for Sparcstations, so that sales of those machines have tailed off as users decide to wait for the new ones. The second major problem is that Sun failed to move quickly enough to impose a hiring freeze in response to the product transsition sales slowdown, which was exacerbated by the company’s problematic transition to a new management information system. In the past five weeks, Sun has added nearly 1,000 people, bringing the total to about 10,000, which may not sound high for a $2,000m-a-year business, but Sun has comparatively low marketing costs because it sells mostly through third parties. As a result, the company is seen to have hired a whole year’s worth of people even before the fiscal year began in July. As a result it is unlikely that Sun will see a profit for its fiscal first quarter – and that may well cause demands for an institutional shareholders for a management shake-up, and near-20% holder AT&T Co is likely to be asked to play a more active management role.
