Oct. 20 (Bloomberg) -- Sun Microsystems Inc., the world's fourth-largest maker of server computers, had a loss after writing down some assets and said sales fell short of estimates as customers held back purchases. The shares slipped 9.2 percent.

Revenue dropped to $2.95 billion to $3.05 billion in the first quarter ended Sept. 28, Sun said today in a preliminary earnings statement. Analysts projected $3.15 billion, according to the average of estimates in a Bloomberg survey. The loss totaled as much 35 cents a share.

Corporate customers are cutting spending on technology because of the credit market freeze. In August, Sun said first- quarter sales would post a ``slight decline'' from $3.22 billion a year earlier. Global budget growth industrywide may slow to as little as 3 percent next year if governments can't rein in the crunch, Forrester Research said last week.

``The company continues to miss its targets,'' said Bill Kreher, an analyst with Edward Jones in St. Louis. ``There's a lack of confidence in management given continued shortfalls.'' He has a ``hold'' rating on the shares and doesn't own them.

The report marked the Santa Clara, California-based company's third straight quarterly sales decline and its second loss in the past three periods. Gross margin, the percentage of sales left after production costs, was 39 percent to 41 percent in the quarter, Sun said.

Sun dropped 53 cents to $5.25 in after-hours trading. The stock had gained 20 cents to $5.78 in Nasdaq Stock Market trading today. The shares have fallen 68 percent this year.

Schwartz's Job Cuts

``Sun and its customers are seeing the impact of a slowing economy,'' Chief Executive Officer Jonathan Schwartz said in the statement.

Schwartz, who took over two years ago, said in May he would trim 2,500 jobs, or about 7 percent of the staff. He also sought to attract more customers to servers, computers used to run Web sites and corporate networks, by offering for free some programs such as Java and Solaris.

Sun plans to write down the value of some units because of the drop in its shares. The biggest charge is related to Sun's acquisition of Storage Technology Corp., spokeswoman Kristi Rawlinson said. Sun bought the maker of storage systems for $4.1 billion in cash in 2005.

The company, with a total market value of $4.4 billion, didn't identify how many businesses will require writedowns. Sun said that as of Sept. 28, the units accounted for $1.8 billion of the $3.2 billion the company records as goodwill on its balance sheet. Sun is evaluating how much it will have to record as expenses.

Losing Sales

Excluding one-time costs, the company had a first-quarter loss of 2 cents to 12 cents a share. It recorded $60 million in expenses related to a reorganization in the quarter. The company plans to report complete results on Oct. 30.

Sun trails International Business Machines Corp., Hewlett- Packard Co. and Dell Inc. in the market for servers. In the calendar second quarter, Sun's share of the $13.8 billion market dropped to 11.8 percent from 13.4 percent a year earlier, according to Stamford, Connecticut-based researcher Gartner Inc.

``They are just not well positioned,'' Kreher said. Sun has an ``uncertain future.''

To contact the reporter on this story: Vivek Shankar in San Francisco at vshankar3@bloomberg.net

Last Updated: October 20, 2008 18:10 EDT