SAN FRANCISCO: Computer server maker Sun Microsystems Inc. said it may reduce its headcount by as many as 5,000 -- nearly 13 per cent of the total -- as part of a plan to cut down losses and return to profits.
The jobs cut, slated to happen in the next six months, is the first major step by the new chief executive Jonathan Schwartz, who succeeded Scott McNealy in April. Sun has some 37,500 workers on its rolls.
Schwartz said the cuts will make the company leaner and more efficient to claim back market it had lost to computer makers including Dell and Hewlett Packard. The company had last cut its staff by 3,000 in 2004.
As part of the restructuring, Sun is also selling off or giving up leases on some of the properties. The company will sell its Newark campus, which should result in annual savings of $30 million to $40 million, and vacate its leased facilities in Sunnyvale. It is also evaluating whether to shed other office sites, including ones gained through acquisitions. Staff will continue working at the Menlo Park campus and the Santa Clara headquarters campus and take up telecommuting.
The plan also covers reducing the company's product line as well as cutting down on its non-core research and development activities.
These measures, it hopes, will result in savings of $480 million to $590 million a year. The full impact of these steps will be felt by June 2007, the company said.
The company has evolved a broad plan to come out of the trouble it has put itself in after the crash of the dotcom phenomenon in 2000. It has gradually lost share in a market where it was leader at one time.
The company has estimated that the restructuring charges will be in the range of $340 million to $500 million over the next several quarters. The maximum hit will be in the quarter ending 30 June 2006.
Sun had announced a quarterly net loss of $217 million in April, while its revenue had grown 20 per cent to $3.18 billion. The loss, it had said then, had been on account of acquisitions. The company is expected to come out with its fifth annual loss in July in reports its fiscal results for the period ending 30 June.
Sun also said it has removed, what it calls a poison pill provision against hostile takeover of the company. This, Schwartz said, is just being responsive to the shareholders. Analysts were quick to react saying Sun is preparing itself for being an acquisition target.
In spite of criticism that the company is still not able to make up its mind whether to concentrate on its hardware products or its software offerings, Schwartz said the company's 24-year-old vision -- "the network is the computer'' -- remains unchanged. However, it will change priorities in allocating resources.
The lay-off and restructuring plans, announced after the close of regular trading, had little impact on Sun's shares, which dropped 1 cent in after-hours trading. Earlier, the shares rose 8 cents, to close at $4.63.
