Sun to set on jobs of 2,500 workers

2 May 2008

Server and software giant Sun Microsystems said last night that it is to cut between 1,500 and 2,500 jobs – or 7.5pc of its workforce – after stunning Wall Street with an unexpected third-quarter loss, which it blamed on US macroeconomic factors.

Sun, which employs 174 people in Ireland, reported Q3 revenues of US$3.2bn, down 0.5pc on the previous year.

Wall Street had been expecting Sun to turn a profit for the first three months of 2008 to buoy up sentiment as global markets take a battering. Instead, the California-based technology powerhouse shocked the Street with a net loss of US$34m.

“The US economy presented Sun with significant challenges in the third quarter, masking our progress in developing nations and economies across the world,” said Jonathan Schwartz, chief executive of Sun Microsystems.

“With double-digit, year-over-year growth in India and Brazil, and triple-digit billings year-over-year growth in our energy-efficient, Solaris-based Chip Multi-Threading (CMT) systems, Sun made considerable progress during the quarter.

“We continue to invest in the future created by open alternatives to proprietary technologies, best exemplified by the acquisition of MySQL. The world is moving to open source innovation, and Sun continues to lead that revolution,” Schwartz claimed.

The 2,500 jobs cuts out of Sun’s global workforce of 34,000 people represent the largest scale back in job numbers at the company since it decided to axe 13pc of its workforce – up to 4,000 people – amidst the server market downturn of 2006.

During the quarter, Sun reported year-over-year revenue growth in 12 out of its 16 sales geographies during the third quarter, with double-digit revenue growth in key international markets across EMEA, Asia Pacific and the International Americas.

From a product perspective, Solaris-based Chip Multi-Threading (CMT) systems billings more than doubled year-over-year, with the company’s blade systems also delivering impressive billings growth, fuelled by Sun’s comprehensive portfolio spanning AMD Opteron, Intel Xeon and Sun UltraSPARC offerings.

During the quarter, Sun announced the close of two significant acquisitions: open source database provider MySQL and Innotek, whose VirtualBox products provide free desktop virtualisation.

Sun signed a landmark collaboration agreement with The People’s Republic of China Ministry of Education to cultivate integrated circuit engineering talent and industry development based upon its OpenSPARC open source, silicon platform.

Sun was awarded significant contracts including funding from the Defence Advanced Research Projects Agency (DARPA) for a five-and-a-half year research project focused on microchip interconnectivity via on-chip optical networks enabled by silicon photonics and proximity communication.

Cash generated from operations for the third quarter of fiscal 2008 was US$329m, and the cash and marketable debt securities balance at the end of the quarter was US$3.801bn.

During the third quarter, Sun continued to leverage its cash position, spending US$300m to repurchase 17.5 million shares of its common stock.

By John Kennedy