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After unprofitable quarter, Sun to cut jobs

Sun will cut 1,500 to 2,500 jobs after swinging to unprofitability. Also, Sun bids adieu to an earlier operating margin target, blaming a hard economy.

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Stephen Shankland principal writer
Stephen Shankland has been a reporter at CNET since 1998 and writes about processors, digital photography, AI, quantum computing, computer science, materials science, supercomputers, drones, browsers, 3D printing, USB, and new computing technology in general. He has a soft spot in his heart for standards groups and I/O interfaces. His first big scoop was about radioactive cat poop.
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  • I've been covering the technology industry for 24 years and was a science writer for five years before that. I've got deep expertise in microprocessors, digital photography, computer hardware and software, internet standards, web technology, and other dee
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Stephen Shankland
2 min read

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."