September 18, 2003 8:35 AM PDT

Sun to lay off 1,000

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Sun Microsystems is cutting about 1,000 more jobs to try to return to profitability--the third round of layoffs in the company's effort to recover from the high-tech downturn.

The cuts will affect just under 3 percent of the company's 36,000 total employees, or roughly 1,000 total, Sun spokeswoman May Goh Petry said Thursday. Notifications have begun, and Sun expects most of the cuts to be completed by the end of September.

"Unlike the last reduction in headcount, this one is in specific areas. We're still investing in other areas," Petry said. Some of those who lose jobs will be able to move into areas in which Sun is expanding, she added.

In a statement released late Wednesday, the company said the layoffs are in "targeted areas of the company to more tightly align the organization toward achieving its fiscal year 2004 goals." Those goals include "growing revenues, improving profitability and increasing shareholder value," while continuing to invest in new technology, the company said.

The layoff announcement comes in the middle of one of Sun's once-per-quarter product launches.

In the manic late 1990s and just beyond, Sun's revenue soared past $5 billion per quarter as the company profited from products well-suited to the Internet boom. But Sun has had to grapple with the bust that followed, which combined a gray market of used equipment, a recession, deep price cuts, increasingly capable servers using Intel processors, and reinvigorated competition from IBM. Its revenue now is about $3 billion per quarter.

Sun began a 3,900-employee layoff in October 2001. In April 2002, the company more quietly began 1,000 job cuts, partly through attrition--cuts that later were folded into a larger 4,400-employee layoff announced in October 2002. That round was part of an attempt to become profitable in the first half of 2003. That plan failed.

At times, financial analysts have pushed for deeper cuts, but CEO Scott McNealy has defended the company's actions as "reasonable and responsible."

The new cuts will be worldwide. Some of the layoffs will stretch into the first quarter of 2004 because of various international laws regarding layoffs, Petry said.

On Tuesday at the company's SunNetwork conference in San Francisco, McNealy predicted a computing price plunge in coming years as customers realize that the hardware and software they're buying is overpriced and overly complicated. But Sun won't be the one experiencing layoffs from that change, he said, asserting that his company's technology is headed in the right direction. Competitors, though, can't afford to sell the simpler technology because they rely on revenue sources that would be crushed, he said.


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