Sun sheds 5,000 jobs

Sun Microsystems says it is to shed up to 5,000 jobs worldwide – around 13% of its workforce – as part of a US$590 million cost-cutting exercise.

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By  Eliot Beer Published  June 1, 2006

Sun Microsystems says it is to shed up to 5,000 jobs worldwide – around 13% of its workforce – as part of a US$590 million cost-cutting exercise. While the cuts will be across Sun’s 37,500 global workforce, current indications suggest its Middle East operations will be unaffected. Sun’s local office had no comments to add to the corporate announcement at time of writing. The cost cutting exercise has been widely expected, following the departure of Sun co-founder Scott McNealy as CEO at the end of April this year, and the appointment of former chief operating officer Jonathan Schwartz. McNealy had previously indicated his reluctance to cut Sun’s workforce, seen by many as too large to be supported by the company in its current financial position. Sun announced a loss of $217 million in its third financial quarter at the same time as McNealy’s departure, compared to a $28 million loss for the same period last year. The company expects the latest round of cost cuts to save it up to $590 million a year, with the cuts to cost Sun between $340 million and $500 million this year. Analysts have been suggesting Sun was over manned since its $4.1 billion acquisition of StorageTek in 2005, which failed to generate job cuts and provoked a large amount of criticism. “I'm confident that we're on the right path – revenues and gross margins were up in Q3 year-over-year and our investments in core R&D activities are paying off,” said Schwartz in a statement announcing the cuts. “I believe that execution of our strategy to provide innovation and choice will pay off in value to customers and that value will be reflected in business performance.” Sun predicts it will be profitable again by the end of 2007.

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