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| UPDATED: 2006-06-02 |
 Sun Drops On Job Cuts News 
By: David Utter 2006-06-02 The workforce slashing that Wall Street has been begging for at Sun Microsystems will claim 4,000 to 5,000 jobs, but investors wanted to see the axe fall on even more employees.  CEO Jonathan Schwartz will do what predecessor and current chairman Scott McNealy never wanted to do, and undertake some corporate bloodletting at Sun Microsystems (SUNW).
The company announced its board's approval of a growth plan that will include cost cutting by way of job cuts, the sale of one campus, and an exit from leasing facilities in Sunnyvale, CA. Sun anticipates its moves will help it achieve operating income growth of at least 4 percent of revenues for the 2007 fiscal year. Once Schwartz's initiatives are in place, Sun expects to have cost savings between $480 million and $590 million annually. The majority of the restructuring charges Sun will incur over the next few quarters should happen by the June 30th end of the fiscal quarter. The job cuts will eliminate 11 to 13 percent of Sun's workforce. That wasn't enough to satisfy unhappy investors, who pushed shares down 18 cents to 4.45 in trading after the announcement, or analysts, who complained the cuts should have been deeper. One analyst, Toni Sacconaghi of Sanford C. Bernstein, cited in a Reuters report said a 20 percent cut of Sun's 37,500 employee workforce would be needed to drop expenses to 40 percent of revenue. Another analyst, Citigroup's Richard Farmer, said in the report that the company's stock price already reflects the announced job cuts. He said they were "largely in line with Street expectations heading into the announcement." McNealy had long resisted cutting jobs at Sun. The last round of cuts took place in 2004, when about 3,000 jobs were eliminated. That level of bloodletting did not satisfy Wall Street either, and investors had hoped that Schwartz would make the kind of deep cuts that Hewlett-Packard and Intel made after the dot-com crash. Both of those companies experienced a resurgence in recent years, but Intel has slipped a bit against rival AMD. Intel CEO Paul Otellini and other executives have been assessing Intel comprehensively, and it appears that the chipmaker could engage in some job-cutting itself. --- Tag: Sun Microsystems Add to  Del.icio.us |  Digg |  Yahoo! My Web |  Furl
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View All Articles by David Utter About the Author: David Utter is a staff writer for InternetFinancialNews and WebProNews covering technology and business. |
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