News Blog

Update 4:02 p.m. PT: I corrected the revenue Sun reported for the quarter. It was $3.266 billion. Update 3:11 p.m. PT: I added more detail on Sun's employee total and after-hours trading.

IBM, Intel, and Google have been immune to the economic slowdown, but Sun Microsystems wasn't.

The server and software company on Thursday announced grim results for its fiscal third quarter, which ended March 30, that showed declining revenue and a swing to a net loss.

Sun Chief Financial Officer Mike Lehman also said the company will cut 1,500 to 2,500 jobs. The company had 34,400 employees at the end of the quarter.

"The U.S. economy presented Sun with significant challenges in the third quarter, masking our progress in developing nations and economies across the world," said Chief Executive Jonathan Schwartz in a statement.

Sun reported a net loss of $34 million, or 4 cents per share, a decline from net income of $67 million in the year-earlier quarter; the figure includes charges of about 4 cents per share from the acquisition of open-source database company MySQL. Revenue decreased $17 million to $3.266 billion, a notch below the $3.4 billion expected by analysts surveyed by Thomson Financial.

In after-hours trading, Sun's stock dropped $2.48, or 15 percent, to $13.85.

In addition, Lehman stepped back from a financial goal it set in 2007 after declaring Sun had "turned the corner." The company then had aimed for operating margin, a measure of profitability, of 10 percent for fiscal 2009, but Lehman said on Thursday that Sun now is aiming for "at least 7 percent." Lehman blamed the economy, but the figure also was reduced because of MySQL operational costs.

"It's fair to say we're disappointed we're not able to go after the operating margin targets we set two years ago," Lehman said. "It would be damaging to the long-term health of the company to hit an arbitrary number."

Time Warner's AOL division began a 100-person layoff Friday, the Wall Street Journal reported.

The cuts came from the Platform-A group formed last September to offer ad inventory on its own and third-party Web sites. It will cut its employee count to about 1,500, the newspaper said. It quoted an AOL representative who said some people held redundant jobs from the consolidation of several groups into the division.

Last month, AOL replaced Curt Viebranz as the president of AOL with Lynda Clarizio, who had led the Tacoda component Platform-A.

AT&T will cut roughly 1.5 percent of its workforce, primarily among its management ranks, according to a filing Friday with the Securities and Exchange Commission.

The move is part of its "next step in streamlining its operations," following its acquisitions of several regional companies in recent years. AT&T expects to take a pre-tax charge of $374 million in the first quarter as a result of the layoffs.

AT&T said that most of the positions will be in areas that have little contact with customers and that it's workforce is expected to remain stable through the rest of the year.

The layoffs come as AT&T prepares to announce its quarterly results Tuesday.

The telecom behemoth said earlier in the year that a sluggish U.S. economy was resulting in an increase in customers disconnecting service, but this was not anticipated to be significant enough to "materially" harm the quarters results, according to a report in MarketWatch

Shares of AT&T were up a slight 33 cents in pre-market trading to $37.90 per share.

Ouch.

Motorola took another hit Thursday in announcing, through a filing with the Securities and Exchange Commission, that it will lay off 2,600 employees. As a result, it will take a $104 million pretax charge in the first quarter of the year for severance costs.

(Credit: Motorola)

The $104 million is partially offset by "$9 million of reversals for accruals from prior periods that are no longer needed," according to the filing (thanks Silicon Alley Insider). "All three of the company's business segments, as well as various corporate functions, are impacted by these plans."

Thursday's news brings to about 10,000 the number of employees the company has eliminated since early 2007, according to The Wall Street Journal. The layoffs come amid a barrage of headlines documenting the recent death spiral of the company's cell phone business.

Motorola has seen its handset market share plummet, mostly due to a lack of compelling new products. In January, amid pressure from activist investor Carl Icahn, the company said it would consider separating its handset business from the rest of the company in an effort to increase shareholder value and revive the struggling business. Late last month it officially announced its plan to break the company into two publicly traded entities.

This week's CTIA wireless industry trade show could have been a place for Motorola to show that it's bouncing back, by my colleague Charles Cooper noted that the "dearth of interesting product news out of Motorola" at the show "underscores its current plight."

Google is laying off about 300 employees in its newly acquired DoubleClick ad business, according to a source familiar with the matter.

A Google spokesman said the company could not confirm the number of workers laid off.

"Since our acquisition of DoubleClick closed on March 11, we have been working to match and align DoubleClick employees in the U.S. with our organizational plan for the business," the company said in a statement.

"As with many mergers, this review has resulted in a reduction in headcount at the acquired company," the statement said. "Today, we are laying off some DoubleClick employees in the U.S. and placing others in transitional roles. We are confident that our combined organizational structure, along with the skills and experience of our new colleagues, will allow us to continue to offer great products and services to our customers."

The layoffs were expected, with Chief Executive Eric Schmidt giving a warning in a blog posting last month.

The 300 layoffs represent about one-fourth of DoubleClick's workforce and it's likely that additional workers outside the U.S. will also be let go.

Meanwhile, Google says it is splitting up Doubleclick's Performics business unit into two--search marketing and affiliate marketing--and will sell off the search marketing part.

That move, too, is not unexpected. Danny Sullivan of Search Engine Land had called on Google to divest itself of the search engine marketing arm, saying that even if Google keeps its search engine operations completely separate from the search optimization arm, there could be the appearance of impropriety and bias.

Apparently Google agreed.

"It's clear to us that we do not want to be in the search engine marketing business," the company wrote in a blog posting . "Maintaining objectivity in both search and advertising is paramount to Google's mission and core to the trust we ask from our users. For this reason, we plan to sell the Performics search marketing business to a third party. We believe this will allow us to maintain objectivity and the search marketing business to continue to grow and innovate and serve its customers."

The layoff news was first reported by The New York Times.

Layoffs hit close to home Monday at Dell, which said it will close its Austin, Texas, desktop manufacturing facility as part of an effort to trim billions in costs.

The Austin facility, which replaced a smaller facility in Austin, is where Dell fine-tuned its "build-to-order" strategy that allowed it to vault ahead of Compaq for the top spot in PCs in the early part of the decade. By not building PCs until orders get placed, Dell minimizes the time it holds components in inventory, which in turn reduces costs. (Round Rock, Texas-based Dell, in fact, doesn't own components until the forklift carrying them crosses a white line on the floor. See our story from a visit to the center here.)

Although still considered a leader in logistics and low-cost manufacturing, Dell began to see its market share erode in 2005 because of complaints about poor customer service, among other factors. Dell is now number two behind Hewlett-Packard (which bought Compaq) in PCs.

Dell also reaffirmed its plans to reduce employee headcount by at least 8,800. So far, it has eliminated 3,200 positions. Overall, the company hopes to reduce expenses by $3 billion a year on average over the next three years.

Dell also has desktop manufacturing facilities in Tennessee and North Carolina.

eBay will lay off about 125 people worldwide as part of a reorganization to focus on the company's core business, a spokesman confirmed on Thursday.

"The company reorganized to align with the business priorities we outlined in January to focus on making eBay safer and easier to use, optimizing auction with fixed price on the site, and driving growth at PayPal," spokesman Jose Mallabo wrote in an e-mail.

"We are still hiring for positions to support those business priorities and have redeployed hundreds of current staff in new roles; but globally 125 people will be leaving our work force of 15,500--less than half a percentage point."

Reuters reported that the main areas affected would be in North America, Belgium, Spain, and Austria.

Advanced Micro Devices is getting set to launch updated Phenom processors amid rumors that the chipmaker is reducing its workforce by 5 percent.

AMD is slated to begin shipping quad-core Phenom 9850, 9750, 9650, 9550, and 9150 processors in the coming weeks, according to sources close to the company. The "50" branding scheme indicates that the processors are the B3 version of the Phenom that fixes the "TLB" bug. This was first reported in DigiTimes.

Later, AMD will also ship updated triple-core processors, including the 8750 and 8560. Updated triple-core processors will not necessarily be B3 versions, however, according to sources.

Maybe more importantly, AMD is in the midst of handing out pink slips, according to a report in The Inquirer. The report states that AMD is "quietly" cutting about 5 percent of its workforce across the board, not in specific areas. The report also states that AMD may badly miss its numbers this quarter. AMD, when contacted, said that it can't comment on "rumor and speculation."

In related news, AMD announced Thursday the appointment of Nigel Dessau as chief marketing officer. Dessau joins AMD from Sun Microsystems, where he was senior vice president of storage marketing and senior vice president of alliances and licensing. Prior to that, he was at StorageTek and IBM. Dessau will be based in Austin, Texas and report to AMD's Office of the CEO.

Deassau will be challenged to market products if AMD doesn't deliver them in a timely manner and at better performance levels. Over the last year or so, AMD has botched processor launches and delivered underperforming products. The quad-core Barcelona was launched in September of last year but major computer suppliers such as Hewlett-Packard (HP) and Sun Microsystems have yet to ship systems. (Shipments are expected soon.) Though quad-core and triple-core Phenom processors are available from HP, for example, the reception has generally been muted. AMD-ATI's 3800 series of graphics cards have been one of the few bright spots.

In January, CEO Hector Ruiz said that he expects AMD to return to profitability "in the second half of the year beginning in the third quarter...We're not going after unit share just for the sake of unit share."

Note: HP is offering systems with the Phenom X3 8600B, (2.3 GHz), Phenom X4 8700B processor (2.5 GHz), and Phenom X4 9600B processor (2.3 GHz), among other AMD chips.

Google may cut its workforce as it integrates online ad firm DoubleClick into its operations, Google Chief Executive Eric Schmidt warned in a blog posting after the acquisition was approved by the European Commission on Tuesday.

"As with most mergers, there may be reductions in headcount. We expect these to take place in the U.S. and possibly in other regions as well," he wrote. The process of determining the right staffing levels in the U.S. is expected to be completed in the U.S. by early April, and could take longer for offices outside the country, he said.

Schmidt also offered assurances that consumer privacy will be protected following the acquisition. "Our scale and infrastructure mean that users will also be spending less time waiting for Web pages to load," he wrote.

After many months of review, the European Commission finally gave its stamp of approval to the merger, concluding that combining the two companies does not harm competition in the market.