Sun unveils aggressive recovery plan
Updated June 9 at 5:01 p.m.
- By Roseanne Gerin
- Jun 02, 2006
Sun Microsystems Inc. will eliminate 4,000 to 5,000 jobs over the next six months, company officials said this week, as the enterprise computing business struggles to remain competitive and regain its profitability.
The job reductions would cut 11 percent to 13 percent of Sun's work force of roughly 37,500. The cuts will be made worldwide, and it has not yet been determined whether they will specifically affect the company's U.S. federal division, said Deana Alvy, Sun Microsystems Federal Inc.'s spokeswoman. The division has about 1,000 employees in the United States.
Sun also said it was consolidating its real-estate holdings by selling a campus in Newark, N.J., and exiting leased facilities in Sunnyvale, Calif. Sun will continue its operations of its two main campuses in Menlo Park and Santa Clara, Calif.
The company has not been profitable since its fiscal year ended June 30, 2001 when it had $972 million net income. The share price fell 8 cents, or 1.7 percent, to close at $4.55 on the Nasdaq stock market after the company made the announcement May 31.
The initiatives are expected to result in an annual cost savings of $480 million to $590 million, with the full impact to take effect by the last quarter of 2007, the company said in a statement. Sun expects to incur charges of $340 million to $500 million during the next several quarters because of the plan. Most of these charges will be incurred in the fiscal quarter ended June 30.
The job cuts and the elimination of certain properties are the latest efforts to turn around the company following new top executive appointments.
The company underwent a widely expected leadership change in April when founder Scott McNealy stepped down as chief executive officer, although he kept his position as chairman of the board. He founded Sun in 1982.
Jonathan Schwartz, McNealy's successor, has spent his brief time as CEO evaluating the company and looking for ways to boost its efficiency. He previously indicated that he might close down some of the company's less profitable units or products.
Since taking over, Schwartz has announced some executive moves, including the appointments of Richard Green as executive vice president of software, John Fowler as executive vice president of systems, and David Yen as executive vice president of storage.
The company also has announced the expanded roles of Don Grantham as executive vice president of global sales and services, Greg Papadopoulos as chief technology officer and executive vice president of research and development, Crawford Beveridge as executive vice president and chairman, Europe, the Middle East and Africa, Asia and the Pacific, and the Americas, and Bill MacGowan as chief human resources officer and executive vice president of people and places.
Sun of Santa Clara, Calif., had annual revenue of about $11.1 billion and a net loss of $107 million for the fiscal year that ended June 30, 2005.