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Sun begins layoffs

The company succumbs to the economic slump and begins a massive layoff, a process that will cut about 3,900 jobs.

Sun Microsystems began a massive layoff Tuesday, a process that will cut about 3,900 jobs.

The layoff is the same size--9 percent of the company's work force--that Sun predicted, spokeswoman Diane Carlini said. The process, which is affecting all divisions across the world, "should be complete within the next few days," she said.

Sun held out against layoffs longer than most high-tech companies battered by the ongoing spending slump. Even when company executives decided layoffs were necessary, they tried to shield research activities from the cuts.

Sun faces several challenges besides the sour economy. In its core market, Unix servers, IBM is resurgent and Hewlett-Packard is fighting back.

Some analysts, such as Sanford Bernstein's Toni Sacconaghi, have expected deeper cuts at the Palo Alto, Calif.-based company.

In its most recent quarter, Sun reported a loss of $180 million on revenue of $2.86 billion. That's a precipitous plunge from the same quarter the year earlier, when revenue from Internet sales and telecommunications customers was much higher. The company then had net income of $510 million on revenue of $5.05 billion.