Sun Microsystems lays off 6,000

By The Associated Press
Published: November 15, 2008

SAN FRANCISCO — The economic downturn might be pushing Sun Microsystems Inc., one of the storied names in computing, to the brink of extinction.


Sun Microsystems Inc. workers walk outside of Sun headquarters in Santa Clara, Calif., on Friday. AP Photo

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The company’s servers and software helped stimulate the Internet boom, and its engineering acumen is revered. But Sun never fully recovered from the previous financial crisis — the dot-com meltdown — and it has been steamrolled by big shifts in the way businesses buy their back-end computers.

Now Santa Clara, Calif.-based Sun plans to slash up to 6,000 jobs, or 18 percent of its global work force, as it scrambles to cut costs to offset a devastating slump in sales of its high-end servers. Sales of those machines fell 27 percent in the latest quarter as banks and other big customers went under or couldn’t get loans to buy the machines.

Cuts ‘necessary’

"These are hard but necessary changes,” Jonathan Schwartz, Sun’s chief executive, said in an interview Friday as he disclosed the cuts. They sent Sun shares up 4 cents, or 1 percent, to close at $4.12.

Sun also said its software chief, Rich Green, has resigned, as the company splits its software division into three new business groups.

One will handle Sun’s Java programming language — a key ingredient for many Web sites — and open-source database offerings. Open-source software is free software for which Sun sells support services. Another will be responsible for Sun’s Solaris operating system, which is used to run servers. The third will focus on developing programs for "cloud computing” services delivered over the Internet.

No sale yet

Sun’s extreme restructuring is what many investors were calling for. It follows three other rounds of big layoffs in the past three years in which nearly 7,000 jobs were axed. Analysts say it gives Sun breathing room to improve its margins and try to return to profitability.

It might not ultimately be enough, though, to preserve Sun as the company is currently structured if losses keep mounting, renewing speculation about a possible spinoff or sale. Fujitsu Ltd., Hewlett-Packard Co., IBM Corp. or Dell Inc. are all potential suitors.

"They still have strong cash on the balance sheet, and they’re still generating free cash flow, so they’re not dead yet, but the patient is definitely on the respirator,” said Rick Hanna, an equity analyst with Morningstar Inc. "I can’t imagine for a second the board would be satisfied with Sun’s current performance. … What’s happening with Sun at this point is figuring out how to maximize what’s left.”


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Related Topics: Science and Technology, Technology, Economic Issues, Software Engineering, Computer Technology, Software, Programming Languages, Open Source Software, Economic Crisis


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I knew they were doomed when I was at this auction that had several Sun workstations and graphics workstations. I quickly pulled out my PDA and looked up their auction value at ebay. Its like systems that once cost $30,000 are selling on Ebay for something like $50. I know this is the usual arc in the computer world but these were highly sophisticated Motorola processor based computing systems. I guess it was a byproduct of their long waged war against Intel and Microsoft. It also was doomed because memory and peripherals for Sun computers was unbelievably expensive. Basic memory modules ran something like $400 each.
John, Stigler - Nov 15, 2008 at 5:39 pm
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