Sun Microsystems shares plummeted 55 cents, or 14.25 percent, to close at 3.31 dollars, dragging down much of the market.

The network-related hardware, software and services group said it expected to post a loss of seven to 10 cents a share in the three months to September 30, which forms the first quarter of its 2004 business year.

In a statement released after the market closed Monday, it had blamed "a particularly difficult quarter for the company due in part to intense market and competitive dynamics."

JP Morgan Securities analyst Bill Shope said Sun was suffering from the rise of free Linux-based software for "servers", machines that provide services such as e-mail to users of computer networks.

The advance of Linux-based servers was crimping sales of the Unix-based Sun Microsystems servers, he said.

"We believe the deteriorating outlook reflects a sustained industry shift away from UNIX systems to industry standard servers, particularly Linux-based, and that this shift would accelerate in the early stages of a recovery," Shope said.

Sun also said it would take a charge of 1.05 billion dollars for the three months to June 30 after re-evaluating deferred tax payments under US accounting rules.

The announcement erased its previously announced profit of 12 million dollars for the period, which covers the last quarter of its 2003 business year.

Instead, Sun said it would will post a fourth-quarter 2003 revised net loss of 1.039 billion dollars, or a net loss per share of 32 cents.

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