RealTime IT News

Sun Looks to Cut Staff After All

It looks like some heads will roll at Sun Microsystems after all, despite repeated promises from new CEO Jonathan Schwartz that cuts would not happen. The question now is how severe it will be.

The news came during a "fireside chat"-style discussion at the JPMorgan technology conference with Sun's new CFO Michael Lehman, who left the company in 2002 but returned earlier this year.

On the conference call last month where Schwartz was anointed new CEO by his predecessor Scott McNealy, the two said there would be a 90-day review of the company from stem to stern.

That review is almost done, and Sun has gone over every project and org chart within the company and "we are now ready to resize the company," Lehman said.

Still, Sun won't confirm even what he said.

"Sun has been clear about its goal of profitability and better aligning costs with expenses," said Stephanie Von Allmen, a spokesperson for the company. "We will continue to fine-tune our organization, and that can take a variety of forms, but we have not made any announcements in this regard."

Lehman wouldn't give a head count, but said it would be lower than the 10,000 suggested by one analyst. Sun's top executives plan to meet with the board to present their plans for a return to profitability in June and an announcement would be made then.

A part of that would be a reduction in real estate, since Sun has a large number of campuses. Three were found to be at partial capacity, so one campus, dubbed Newark, will be closed and sold, which will result in $40 million in savings in annual operating expenses, he said.

Sun has been working on plans to project out to the fourth quarter of fiscal 2007, one year from now. Since it will take a while for changes to bear fruit, Lehman said not to expect specifics.

"What we're not going to do is give exact quarterly guidance, since it's hard to predict when they will hit and at what magnitude," he said.

Financial effects of the closure of the Newark campus, for instance, would take a while to show up. In the near term, Sun has very realistic revenue growth assumptions for next year, he said.

"We're not going to get to profitability by banking on getting a whole lot of market share in the near term," said Lehman.