Sun described its loss of revenue, particularly in its large server segment, as being due to the recession and "uncertainty associated with the proposed acquisition by Oracle." The deal may indeed be uncertain.

Oracle struck its deal to buy Sun in April. The larger company certainly expected the normal regulatory scrutiny that goes with significant M&A transactions. U.S. regulators cleared the acquisition fairly quickly, but officials of the European Union are continuing to look at the Sun buyout, and they may block it because the combined company would have a large market share in certain server software businesses. Oracle has not been willing to make any concessions to placate the Europeans.

Sun has already done what it can to maintain its attractiveness to Oracle by cutting 3,000 jobs to help its margins. But speculation has begun to surface that Oracle may simply walk away from the deal, even if it means a lawsuit by Sun's board or shareholders. Sun's shares are down to $8.10, so it is clear that Wall Street has concerns about the buyout.

Sun isn't in terribly good shape to remain an independent company, and wasn't even before the Oracle offer. It is in fourth or fifth place in global server sales, and its competitors have larger sales forces, R&D budgets and stronger balance sheets.

Sun's revenues will probably continue to fall. If Oracle walks away, Sun may not have a viable business.

Douglas A. McIntyre is an editor at 24/7 Wall St.