Sun board approves growth plan, including layoffs

Sun's board approved a plan to return to profitability that will include between 4,000 to 5,000 layoffs in the next six months.

Sun Microsystems's board of directors has signed off on a company plan to return to profitability that will include between 4000 - 5000 layoffs in the next six months.

Sun, which has never fully recovered from the dot-com bust, has posted a string of losses or near break-even results over the past five years. For its most recent quarter, the company reported a loss of $US217 million.

Sun said it will cut about 11 per cent to 13 per cent of its workforce, or about 4000 to 5000 employees, over the next six months. It will also sell off its campuses in Newark, New Jersey, and Sunnyvale, California, while retaining its operations in Menlo Park, California, and Santa Clara, California.

From those actions, Sun expects annual savings of between $US480 million and $US590 million and to incur restructuring charges between $US340 million and $US500 million. The charges will be spread out over the next several quarters, but the majority will be incurred in the quarter that ends June 30, 2006, the company said.

Sun A/NZ managing director, Jim Hassell, said the impact of this decision locally was expected to be low, with the majority of changes made in the US.

"We will manage this program locally in a 'business as usual' manner, whereby we continually rebalance our workforce to the needs of the market," he said. "As part of this overall program globally, Sun is seeking to rebalance its workforce and we expect that during the next 12 months it will be increasing sales and technical expertise in the field."

Sun's board also approved the company's operational goals, which include fourth-quarter operating income of at least 4 percent of revenue and longer-term operating income of at least 10 percent of revenue. The operating income and expense expectations exclude restructuring charges, but include charges related to stock-based compensation and amortization of purchased intangibles.

Other goals for the company include revenue growth in the low-to-middle single digits, gross margin of about 43 percent and operating expenses of about $US5.6 billion to $US6 billion for fiscal 2007. Sun's fiscal year begins July 1.

The move comes on the heels of one of the first major executive realignments at Sun since Jonathan Schwartz stepped in as chief executive officer in April, replacing co-founder Scott McNealy, who is still chairman. Sun last month combined its Sparc and x64-based server groups under one umbrella group, now called the Systems Group, and tapped John Fowler as executive vice-president of the new group. Fowler formerly headed up the group responsible for Sun's x64-based servers that use Advanced Micro Devices Opteron processors.

David Yen, formerly executive-vice president of Sun's former Scalable Systems Group -- which managed the company's Sparc-based servers -- will now serve as executive vice-president of Sun's storage group. As part of the shake-up, Mark Canepa, who has been with Sun for a decade and most recently headed up Sun's storage group, is leaving the company.

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