Sun braces itself for downsizing

Sun is about to re-structure according to signs emerging today. Sun's returned CFO, Michael Lehman, has told analysts: "We are now ready to resize the company," and state officials in Massachusetts have been informed that 50 jobs will go over the next few months.

Sun is cutting 200 jobs from its division designing Sparc servers. It has also announced it wants to close over 120 offices in the next few months.

Lehman returned to Sun just before Scott McNealy handed over the CEO reigns to Jonathan Schwartz. His reputation as a hard-nosed profit-chaser and cost-controller led financial analysts to suppose that Sun would layoff many people to help reverse a stream of poor results. Although Sun showed revenue growth in servers this quarter, there have been net financial losses in 16 out of the past 20 quarters. The recent third quarter showed a loss of US$217 million.

When Schwartz was appointed he made the point publicly that he would not countenance deep layoffs, a term taken to mean 10,000 or so job losses. There is now speculation that up to 5,000 jobs could go in total.

Restructuring recommendations could go to Sun's board in the next few weeks with a public announcement by the end of July. Schwartz and Lehman would present restructuring details including targets for revenue growth and profits and layoff numbers. Head count reductions will form the major cost-saving element of the restructuring. A layoff plan announcement could come in June.