Sun to slash thousands of jobs

Struggling workstation and server maker said it will cut between 4,000 to 5,000 employees over the next six months.

Dawn Kawamoto Former Staff writer, CNET News
Dawn Kawamoto covered enterprise security and financial news relating to technology for CNET News.
Dawn Kawamoto
2 min read
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.