The US company said it would announce a larger than expected loss and take a $1bn charge to reflect a writing-down in the value of tax credits carried on its balance sheet.

Sun said it would take the charge in the fourth quarter of its financial year.

The recession in the computer industry has hit Sun harder than rivals, who have been able to produce cheaper computers with industry-standard components.

The tax issue is interesting, but... here's another quarter where they're going to miss revenue and earnings per share Dan Niles, analyst Lehman Brothers

Shares in Sun closed down 55 cents, or 14.3%, at $3.31.

Falling revenue

Analysts say Sun has struggled to compete with rivals Hewlett-Packard and IBM in the high-end server market and number one PC maker Dell at the low end.

The Santa Clara, California-based company's revenue has declined for nine consecutive quarters.

"The tax issue is interesting, but it's more interesting that here's another quarter where they're going to miss revenue and earnings per share," said Dan Niles, an analyst at Lehman Brothers.

Sun has laid off thousands of employees since the high-tech recession began.

It is hoping for a turnaround with its N1 computing architecture which automates tasks such as providing storage and computer power.