Sun to axe up to 13pc of workforce

1 Jun 2006

Sun Microsystems has unveiled a restructuring plan that will see the company cut between 11pc and 13pc of its workforce, some 4,000 or 5,000 people. The plan includes several cost-cutting initiatives that will see the company save between US$480m and US$590m.

According to Sun, the plan provides for increased investment in core technology and channel resources, increasing acquisitions and disinvestment in non-core processes and research and development (R&D) activity.

The plan emerged from a month-long review of the company by a team led by Sun president and chief executive officer Jonathan Schwartz.

The initiatives, Sun says, are geared to better align expenses with its core business strategy and drive the company’s operating income goals of at least 4pc of revenues by Q4 of fiscal year 2007 or at least 10pc of revenues in the long term.

The move comes a month after Scott McNealy, one of the most outspoken and sometimes controversial figures in the IT industry, has stepped down from his role as CEO at the computer company he helped to found.

The company said the initiatives are designed to focus and streamline Sun and are expected to result in an annual cost savings of between US$480m and US$590m, with the full impact expected to take effect by Q4 of fiscal 2007.

The company expects to incur restructuring charges ranging from US$340m to US$500m over the next several quarters in connection with the plan, the majority of which will be incurred in the fiscal quarter ended 30 June, 2006.

“Momentum is clearly increasing around Sun’s core technology and channel programs, with Java, Solaris, SunFire and StorageTek platforms all gaining share,” said Schwartz.

“We’ve worked hard to reinvent the entirety of Sun’s product line, from software to systems, storage and services. 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.”

By John Kennedy