Sun reported a 7 per cent drop in first-quarter revenue on Thursday, coming in the mid-range of its previously lowered earnings forecast.

The hardware maker posted revenue of approximately US$2.99bn for the quarter, a drop from its year-ago performance.

Sun also posted a net loss of approximately US$1.68bn, or US$2.24 a share, for the first quarter, compared with a net profit of US$89m, or 10 cents a share, a year ago. Excluding its restructuring charge and write-offs for the declining value of its goodwill, Sun posted a net loss of US$65m, or nine cents a share.

Sun, which issued an earnings warning last week, missed analysts' revised revenue projections of US$3.06bn, according to Thomson Reuters. And the company also missed analysts' earnings expectations of a loss of eight cents, coming in with a slightly larger loss than Wall Street expected of nine cents a share.

"Although we saw another quarter of growth in our Solaris-based chip multi-threading and open storage systems, the economic downturn continued to weigh on our customers, especially those that contribute to our traditional high-end businesses," Jonathan Schwartz, Sun chief executive, said in a statement.

He added, however, that given the company's strong cash position of US$3.12bn in marketable securities and cash, as well as cost controls and a market that is interested in open source, the company is positioned to weather the tough economic climate.

Sun, which released its results after the market's close, ended the regular trading session at US$5.29 a share, up 9.5 per cent. But in after-hours trading, its shares fell to US$5.13 a share, down 3 per cent.

During a conference call, Schwartz said some of Sun's traditional business lines bore the brunt of the pullback in orders, but its newer lines performed well.

Mid-range and high-end servers based on Sparc processors began to see softness starting back in the third quarter of the last fiscal year and fell 27 per cent in the first quarter, compared to the same period a year ago.

But in comparison, Sun's Solaris-based chip multi-threading systems, which use Sun's "Niagara" processors, grew 83 per cent in the quarter compared with last year.

"I talked to customers who are moving back to Solaris but not on our hardware," Schwartz said, noting he's pleased with the strategy Sun has been pursuing over the past several years where its customers can use its Solaris operating system and MySQL database on other vendors' hardware.

Sun continues to be exposed to the spending vagaries of the financial services sector. Schwartz said orders dropped from these customers.

"We're not naive enough to think that all we need to do is just spend more time with those customers," Schwartz said, adding that the company plans to spend more of its time with those existing Sun customers who are already running MySQL and trying to sell them more Sun software, services and hardware.