May 31, 2006 2:22 PM PDT

Sun to slash thousands of jobs

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Sun Microsystems announced Wednesday plans to cut up to 13 percent of its work force, in its first major restructuring effort under new CEO Jonathan Schwartz.

The struggling workstation and server maker said it will cut between 4,000 to 5,000 employees over the next six months, which represents an 11 to 13 percent cut in its global work force of 37,500. Sun said the bulk of the layoffs are expected to occur in the current quarter.

The Santa Clara, Calif., company anticipates that the cuts will save it $480 million to $590 million annually by the fourth fiscal quarter in 2007.

"We've worked hard to reinvent the entirety of Sun's product line, from software to systems, storage and services," Schwartz said in a statement. "It's on that rebuilt foundation that we are reinventing our business model on a far simpler base, and focusing our energies on the automation, energy efficiency and network innovation at the heart of our technology leadership."

Schwartz, who was named Sun's chief executive last month, has wasted no time in paring down the company's headcount since taking the reins. As a result, he may avoid the criticism encountered by company founder and CEO predecessor Scott McNealy, who was faulted by many industry observers and some former Sun executives as having moved too slowly in bringing Sun's costs in line with its falling revenue.

Sun cut more than 13,000 jobs between 2001 and 2005, but it wasn't enough to keep costs in line with slumping sales. Revenue dropped 39.3 percent from fiscal 2001 to 2005, while operating expenses dropped only 26.5 percent, according to analysts.

The layoffs, in part, may not come as a surprise, given that Sun's former chief financial officer, Michael Lehman, was pulled out of retirement three months ago to rejoin the company.

Sun said Lehman would take a "fresh look at everything" upon his return and assemble a "leaner and more efficient business model."

Lehman and Schwartz began extensive reviews of the company's global operations about a month ago, Sun said.

As part of its efforts to save costs via consolidating its real estate holdings, Sun will sell its Newark, Calif., campus and also give up leased facilities in Sunnyvale, Calif. The company noted, however, that it will continue operations at its two major Bay Area campuses in Menlo Park and Santa Clara, Calif.

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20 comments

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Schwartz lied about job cuts
Everybody knew when Schwartz became CEO that more job cuts would be expected. But Schwartz denied it ( <a class="jive-link-external" href="http://www.dailytech.com/article.aspx?newsid=2008" target="_newWindow">http://www.dailytech.com/article.aspx?newsid=2008</a> ).

I guess everybody was right and Schwartz was wrong.

It looks like he is off to a good start.
Posted by Dachi (797 comments )
Reply Link Flag
Be fair...
While this article claims that JS is against "job cuts", from
everything I've heard he is/was against cutting deeply as some
on wall street suggested (i.e. 10K). I think this article you
posted did not clearly describe his position.
Here is a quote from another article on the subject:
Sun Microsystems' new chief executive, Jonathan Schwartz, has
vowed not to make the deep job cuts some on Wall Street say
are needed to revive the company's profits.
<a class="jive-link-external" href="http://www.mercurynews.com/mld/mercurynews/business/" target="_newWindow">http://www.mercurynews.com/mld/mercurynews/business/</a>
technology/14431230.htm
So the term being used is "deep cuts". I guess at the end of the
day it depends on what the meaning of deep is... to me 13% is
not deep, but that's just me.
Even more here:
<a class="jive-link-external" href="http://www.itbusinessedge.com/item/?ci=15335" target="_newWindow">http://www.itbusinessedge.com/item/?ci=15335</a>
Posted by robot999 (109 comments )
Link Flag
Schwartz lied about job cuts
Everybody knew when Schwartz became CEO that more job cuts would be expected. But Schwartz denied it ( <a class="jive-link-external" href="http://www.dailytech.com/article.aspx?newsid=2008" target="_newWindow">http://www.dailytech.com/article.aspx?newsid=2008</a> ).

I guess everybody was right and Schwartz was wrong.

It looks like he is off to a good start.
Posted by Dachi (797 comments )
Reply Link Flag
Be fair...
While this article claims that JS is against "job cuts", from
everything I've heard he is/was against cutting deeply as some
on wall street suggested (i.e. 10K). I think this article you
posted did not clearly describe his position.
Here is a quote from another article on the subject:
Sun Microsystems' new chief executive, Jonathan Schwartz, has
vowed not to make the deep job cuts some on Wall Street say
are needed to revive the company's profits.
<a class="jive-link-external" href="http://www.mercurynews.com/mld/mercurynews/business/" target="_newWindow">http://www.mercurynews.com/mld/mercurynews/business/</a>
technology/14431230.htm
So the term being used is "deep cuts". I guess at the end of the
day it depends on what the meaning of deep is... to me 13% is
not deep, but that's just me.
Even more here:
<a class="jive-link-external" href="http://www.itbusinessedge.com/item/?ci=15335" target="_newWindow">http://www.itbusinessedge.com/item/?ci=15335</a>
Posted by robot999 (109 comments )
Link Flag
Sun needed to do this
Schwartz acted quickly and decively... a welcome change from his predecessor. No one wants to cut jobs, but for Sun, this move was long overdue. I really hope they can marry it with a successful product strategy.
Posted by hughbaxter (5 comments )
Reply Link Flag
Absolutely Right
Yep, it's nice to see some refreshing action to actually help shareholder value at the company for a change. I still think (based on what I've seen him say) that Schwartz is pretty arrogant, but unlike McNealy, he may be able to actually do what needs to be done to right the ship. You don't need to be a technologist to run a technology company well -- but unlike McNealy, you at least need to be able to deal with change, and not perpetually spend 100% of your time between the back nine at Pebble Beach and sticking your head in the sand, all the while complaining that Microsoft is the antichrist. Demonizing the competition doesn't pay the bills, Scott -- revenue and performance do.

Perhaps the fun (and profitable) ride I've had shorting Sun stock over the last five years is finally coming to an end. Let's hope it means some real growth again for a company that used to truly innovate.
Posted by phylum--2008 (29 comments )
Link Flag
Sun needed to do this
Schwartz acted quickly and decively... a welcome change from his predecessor. No one wants to cut jobs, but for Sun, this move was long overdue. I really hope they can marry it with a successful product strategy.
Posted by hughbaxter (5 comments )
Reply Link Flag
Absolutely Right
Yep, it's nice to see some refreshing action to actually help shareholder value at the company for a change. I still think (based on what I've seen him say) that Schwartz is pretty arrogant, but unlike McNealy, he may be able to actually do what needs to be done to right the ship. You don't need to be a technologist to run a technology company well -- but unlike McNealy, you at least need to be able to deal with change, and not perpetually spend 100% of your time between the back nine at Pebble Beach and sticking your head in the sand, all the while complaining that Microsoft is the antichrist. Demonizing the competition doesn't pay the bills, Scott -- revenue and performance do.

Perhaps the fun (and profitable) ride I've had shorting Sun stock over the last five years is finally coming to an end. Let's hope it means some real growth again for a company that used to truly innovate.
Posted by phylum--2008 (29 comments )
Link Flag
Sun needed to do this
Schwartz acted quickly and decicively... a welcome change from his predecessor. No one wants to cut jobs, but for Sun, this move was long overdue. I really hope they can marry it with a successful product strategy.
Posted by hughbaxter (5 comments )
Reply Link Flag
Sun needed to do this
Schwartz acted quickly and decicively... a welcome change from his predecessor. No one wants to cut jobs, but for Sun, this move was long overdue. I really hope they can marry it with a successful product strategy.
Posted by hughbaxter (5 comments )
Reply Link Flag
The next steps is to align with Intel
True.. Sun needs to move away from the anti Intel emotions it has displayed in the past. It seems it is going that way. First, the CEO stepped down. Second, layoffs. Third, align with the best coming processors to survive.. You want an example: Apple..
Posted by ilover2 (17 comments )
Reply Link Flag
Why Intel?
The Sun x86/64bit products based on AMD CPUs look like they're doing just fine. Don't think a Sun/Intel offering could do any better.
Posted by b0gu5 (3 comments )
Link Flag
The next steps is to align with Intel
True.. Sun needs to move away from the anti Intel emotions it has displayed in the past. It seems it is going that way. First, the CEO stepped down. Second, layoffs. Third, align with the best coming processors to survive.. You want an example: Apple..
Posted by ilover2 (17 comments )
Reply Link Flag
Why Intel?
The Sun x86/64bit products based on AMD CPUs look like they're doing just fine. Don't think a Sun/Intel offering could do any better.
Posted by b0gu5 (3 comments )
Link Flag
Did SUN layoff any Indian Staff?????
Did Sun shutdown or scale back any of its offshore works? I know some real Engineers who know more than shell scripting. I'd think about investing or purchasing their equipment only if they thought about investing in America and her I.T. workers.
Posted by No_more_H1Bs (2 comments )
Reply Link Flag
Did SUN layoff any Indian Staff?????
Did Sun shutdown or scale back any of its offshore works? I know some real Engineers who know more than shell scripting. I'd think about investing or purchasing their equipment only if they thought about investing in America and her I.T. workers.
Posted by No_more_H1Bs (2 comments )
Reply Link Flag
Solaris is a has-been OZ!
Solaris has been dying for a few years, it's just going to be properly burried now.

Linux is a much better choice and what with Sun in India being a support disaster, Linux is even supported better!
Posted by mdturnerinoz (2 comments )
Reply Link Flag
Solaris is a has-been OZ!
Solaris has been dying for a few years, it's just going to be properly burried now.

Linux is a much better choice and what with Sun in India being a support disaster, Linux is even supported better!
Posted by mdturnerinoz (2 comments )
Reply Link Flag
 

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