Debt-rating agency Standard & Poor’s (S&P) has downgraded Sun Microsystems’ debt to junk-bond levels, citing the threat of increasing competition and Sun’s inability to remain consistently profitable.In a report, S&P said it lowered Sun’s bond rating one grade to BB+, though it noted that Sun has a stable outlook with enough cash on hand to handle its outstanding debt.”The downgrade reflects weak and inconsistent profitability, and our expectation that Sun will be challenged to profitably expand its market presence,” S&P analyst Martha Toll-Reed said.The credit agency said Sun has a “relatively narrow revenue base” compared with competitors IBM and Hewlett-Packard, and has not been able to consistently report profitable quarters in the past two to three years.Additionally, S&P “does not expect profitability to return to historical levels in the near-to-intermediate term, given fierce industry price competition and Sun’s high R&D investment rate.”Sun could not be immediately reached for comment. In a statement issued in the wake of the downgrade, the company cited its strong cash reserves of more than US$5 billion, an amount that far outstrips its $1.3 billion in bond-related debt.”With this strong financial foundation, a broad range of products, technologies and solutions, and a global base of customers… Read full this story
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