Sun issues sales warning

Workers have been asked to stay away for a week

Sun Microsystems of the US, the world's leading maker of computer networks servers, has sharply lowered its sales forecast for the three months to June.

The news is Europe. The surprise is Europe

Michael Lehman, Sun chief financial officer

The company blames weak demand in Europe for a dramatic drop in sales.

It has lowered its forecast for the June quarter to 10% or more below Wall Street expectations.

The company has already been struggling with a slowdown in the US market in recent months, in common with other high-tech giants.

Increased competition

Chief financial officer Michael Lehman said: "The news is Europe. The surprise is Europe."

He said some Asia-Pacific demand was also below expectations.

He cut the companies' fourth quarter sales forecast to $3.8bn-4bn, compared with a $4.4bn average estimate of analysts polled by Thomson Financial/First Call.

Gross profit margins would also be down on April's forecast.

The margin was 41.6% in the third quarter but Sun's long-term goal is the high 40s.

Mr Lehman shrugged off questions that competitors such as IBM were encroaching on Sun's position as the number one US seller of powerful server computers.

Last month, Sun told workers it was closing for a month in July, as part of a cost-cutting programme.