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http://www.reuters.com/article/rbssS...42135420081114
UPDATE 3-Sun Microsystems to cut up to 6,000 jobs
Fri Nov 14, 2008 10:49am EST
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* Cutting 5,000 to 6,000 jobs or up to 18 pct of workforce
* Aims for annual cost savings of $700-800 mln
* Shares down 1.5 pct; off 77 pct this year (Adds analysts comment, updates share price)
NEW YORK, Nov 14 (Reuters) - Sun Microsystems Inc (JAVA.O: Quote, Profile, Research, Stock Buzz) said on Friday it will cut 5,000 to 6,000 jobs, as the economic crisis compounds the company's struggles with depressed demand for its high-end business computers.
The job cuts represent 15 to 18 percent of its workforce, and are part of a broader restructuring plan it has undertaken in hopes of saving $700 million to $800 million annually.
The Santa Clara, California-based company expects to incur total charges in the range of $500 million to $600 million over the next 12 months in connection with the plan, which also includes realigning its software division. Rich Green, who ran the software division, is leaving the company.
Shares of Sun were down by 1.5 percent at $4.02 on the Nasdaq after the company announced the layoffs, a move urged by a number of analysts. The broader Nasdaq market was down by 3.7 percent.
Toni Sacconaghi, an analyst with Sanford Bernstein, wrote in a report on Friday that Sun could raise operating margins by 7 percent and earnings by $1 a share if it were willing to cut 20 percent of its workforce. Sun's actual job-cutting plans fall just short of that figure.
Sacconaghi also suggested that Sun may need to sell a controlling stake to an investor in order to right the business.
"While an aggressive workforce reduction is likely the most straightforward path to profitability in the near term, we believe a controlling shareholder could also realize meaningful value by selectively selling, harvesting, or growing specific business lines within Sun," he wrote.
As part of its announced restructuring, Sun said its software business will be split into three divisions: Application Platform Software, run by Executive Vice President Anil Gadre; Systems Platforms, run by Executive Vice President John Fowler; and Cloud Computing and Developer Platforms, run by Senior Vice President Dave Douglas.
Sun's restructuring comes as the economic downturn is prompting deep job cuts across a range of industries, from technology to financial services to retail. U.S. jobless claims hit a 25-year high in September, according to recent government figures.
But many of Sun's problems preceded the current economic crisis. The company has been struggling since the Internet bubble burst and demand for its computers dried up.
Shares of the company are down 98 percent since 2000, the peak of the dot-com boom, and down around 77 percent this year. This year's decline is more than double the fall in the Nasdaq Composite Index .IXIC.
Lately, investors have grown frustrated with Sun's high operating expenses and failure to boost profitability. Last month, Chief Executive Jonathan Schwartz hinted the company would take more dramatic cost-cutting measures after it posted a $1.7 billion quarterly loss.
Sun's struggles have given rise to speculation that it could sell itself, or some key assets.
Southeastern Asset Management disclosed last month that it had become Sun's top investor, holding about 20 percent of its shares. The investment firm said it might go around the tech company's board to talk to "third parties" about alternatives. (Reporting by Paul Thomasch, editing by Dave Zimmerman and Matthew Lewis)
http://www.reuters.com/article/rbssS...42135420081114
UPDATE 3-Sun Microsystems to cut up to 6,000 jobs
Fri Nov 14, 2008 10:49am EST
Email | Print |
Share
| Reprints | Single Page | Recommend (0)
[-] Text [+]
* Cutting 5,000 to 6,000 jobs or up to 18 pct of workforce
* Aims for annual cost savings of $700-800 mln
* Shares down 1.5 pct; off 77 pct this year (Adds analysts comment, updates share price)
NEW YORK, Nov 14 (Reuters) - Sun Microsystems Inc (JAVA.O: Quote, Profile, Research, Stock Buzz) said on Friday it will cut 5,000 to 6,000 jobs, as the economic crisis compounds the company's struggles with depressed demand for its high-end business computers.
The job cuts represent 15 to 18 percent of its workforce, and are part of a broader restructuring plan it has undertaken in hopes of saving $700 million to $800 million annually.
The Santa Clara, California-based company expects to incur total charges in the range of $500 million to $600 million over the next 12 months in connection with the plan, which also includes realigning its software division. Rich Green, who ran the software division, is leaving the company.
Shares of Sun were down by 1.5 percent at $4.02 on the Nasdaq after the company announced the layoffs, a move urged by a number of analysts. The broader Nasdaq market was down by 3.7 percent.
Toni Sacconaghi, an analyst with Sanford Bernstein, wrote in a report on Friday that Sun could raise operating margins by 7 percent and earnings by $1 a share if it were willing to cut 20 percent of its workforce. Sun's actual job-cutting plans fall just short of that figure.
Sacconaghi also suggested that Sun may need to sell a controlling stake to an investor in order to right the business.
"While an aggressive workforce reduction is likely the most straightforward path to profitability in the near term, we believe a controlling shareholder could also realize meaningful value by selectively selling, harvesting, or growing specific business lines within Sun," he wrote.
As part of its announced restructuring, Sun said its software business will be split into three divisions: Application Platform Software, run by Executive Vice President Anil Gadre; Systems Platforms, run by Executive Vice President John Fowler; and Cloud Computing and Developer Platforms, run by Senior Vice President Dave Douglas.
Sun's restructuring comes as the economic downturn is prompting deep job cuts across a range of industries, from technology to financial services to retail. U.S. jobless claims hit a 25-year high in September, according to recent government figures.
But many of Sun's problems preceded the current economic crisis. The company has been struggling since the Internet bubble burst and demand for its computers dried up.
Shares of the company are down 98 percent since 2000, the peak of the dot-com boom, and down around 77 percent this year. This year's decline is more than double the fall in the Nasdaq Composite Index .IXIC.
Lately, investors have grown frustrated with Sun's high operating expenses and failure to boost profitability. Last month, Chief Executive Jonathan Schwartz hinted the company would take more dramatic cost-cutting measures after it posted a $1.7 billion quarterly loss.
Sun's struggles have given rise to speculation that it could sell itself, or some key assets.
Southeastern Asset Management disclosed last month that it had become Sun's top investor, holding about 20 percent of its shares. The investment firm said it might go around the tech company's board to talk to "third parties" about alternatives. (Reporting by Paul Thomasch, editing by Dave Zimmerman and Matthew Lewis)
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