When I was at Financial World Magazine, we would do a list of the ten worst managed companies in America. The cycle was about once a year. To make the list, a company had to do a lot wrong compared to the rest of the stock market and its peer group. The financial results would have to be very poor, and companies in industries that were down across the board were usually not included. For this tech list, a number of financial sources were consulted along with research from Wall Street and sources like ValueLine, Morningstar, Investor's Business Daily and Yahoo!Finance.
John Shoemaker, who worked at Sun (NASD:SUNW) for fifteen years and ran the company's server group, wrote a brutal assessment of Sun's multiple strategic mistakes over the years which ran in Business Horizons, the journal of the business school at Indiana University, according to a summary provided by CNET. He recounts the lost opportunities to cut costs, the departure of president Ed Zander, the massive and futile investment in Java, and the purchase of StorageTek.
For those who have watched the company over the years, it all rings true: The company's stock, which traded close to $15 near the beginning of 2002 has rarely been above $5 in the last four years.
According to data from Morningstar, Sun Microsystems Inc's revenue peaked in 2001 at $18.25 billion dollars. Operating income hit is high mark in 2000 at $2.4 billion. Since 2002, the company has had negative operating income in every year. Revenue has been essentially flat since 2003. In the most recent quarter, ending 12/25/05, revenue rose to $3.337 billion, but the cause of the increase was acquisition related. Despite the revenue growth, the company had a net loss of $223 million.
To quote the Morningstar write-up on Sun's prospects: "The company's competitive position deteriorated considerably in the recent downturn; regaining lost market share will be tough." You can say that again.
SUNW 5-yr Chart
Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He was also president of Switchboard.com when it was the 10th most visited website in the world, according to MediaMetrix. He has been chief executive of FutureSource, LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. McIntyre can be reached at firstname.lastname@example.org.