Sun to Cut More Jobs, Book Restructuring Charges

Published: August 9, 2007

by Timothy Prickett Morgan

It is early in a new fiscal year for Sun Microsystems, and while the company looked pretty good as fiscal 2007 ended in June, the company knows that it has some pretty tough product transitions coming up in its Sparc and X64 server lines, a storage business that is under pressure to perform better, and tough competition on all fronts. And so, in an effort to reach its profitability goals for fiscal 2008, Sun is getting ready to do another round of layoffs.

In June 2006, as Jonathan Schwartz took over the helm of Sun as president and chief executive officer and Mike Lehman was brought back as chief financial officer and his office mate, Sun said it would cut around 4,000 to 5,000 employees from its payroll (somewhere between 11 percent and 13 percent of its workforce) to get costs more in line with revenues, which had fallen in recent years. Sun had previously cut 3,300 workers from its payroll in 2004 as sales had stalled, and has made minor layoffs over the past five years. Sun has historically been loath to do layoffs, since it believes in doing research and development and using technology as a differentiator. And that is one of the reasons why Sun founder Scott McNealy is no longer CEO at Sun and why Schwartz is. He will make the cuts.

And, according to an 8K filing made with the Securities and Exchange Commission this week, Sun is going to be making cuts again. In that filing, Sun said that it would book charges of between $100 million to $150 million for further restructuring in fiscal 2008, and said that it would book these charges in the first half of the fiscal year. That means it will book the charges before the end of calendar 2007. Sun did not say how many jobs were at stake, or in what divisions, but based on past restructurings, these restructurings should mean somewhere between 1,200 and 1,500 employees will be laid off before the holiday season.

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