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Sun Plans To Cut 3,000 Jobs Over the Next 12 Months

Sun disclosed Tuesday in regulatory filings that it plans to cut 3,000 jobs from its workforce, as it awaits the go-ahead on its takeover by Oracle. It's cut 7,600 workers in three rounds of layoffs over three years, according to SEC filings. Will this mark the end of the downsizing?

The Sun Board of Directors voted Tuesday to eliminate "up to 3,000 jobs" or 10% of its remaining workforce over the next 12 months, according to an 8K filing with the Securities Exchange Commission.

The move was taken "in light of the delay in the closing of the acquisition" of the company, said the filing, signed by Brian Sutphin, executive VP for corporate development. Oracle's $7.4 billion bid to acquire Sun, launched April 20, has been put on hold as the European Commission conducts an investigation into its possible anti-competitive ramifications.

It's bad news for a skilled workforce like Sun's to be losing workers, but the outlook may be for more of the same, not stabilization, once Oracle takes over. Oracle is not a workplace that coddles people or subsidizes losing operations. It boasts high operating margins by making people productive, getting rid of anyone who isn't and extracting top prices from customers for its wares.

That's not going to change post merger.

Sun ended up in a position of being acquired because there was a fundamental shift underway in its market toward high end Unix from IBM in particular and also HP. Some of these migrating enterprise customers may have preferred Sun's Solaris and UltraSparc, but their confidence in Sun was declining with Sun's revenues. Low end Unix users, where Sun thrived, were being converted in another direction -- Linux.

The Oracle acquisition announcement probably accelerated both of these trends, with both Linux and IBM succeeding in coaxing more customers away, but it didn't create the trends. I doubt if completing the merger will halt them.

Since Sun's customers were voting with their feet for Linux and IBM, what would be the prospect for jobs at Sun if IBM had been the acquirer instead of Oracle? It always seemed to me that there was a greater overlay between what IBM was doing as a business and what Sun was doing, compared to the match up with Oracle.

IBM would have probably migrated UltraSparc users to Power Systems as fast as it could and closed down UltraSparc hardware, unlike Oracle's declared intentions. But the jury is still out on what Oracle can sustain with Sun hardware.

IBM would have been likely to retain more of Sun's Java portfolio and open source initiatives, including MySQL, with more deftness than Oracle is likely to show.

When Red Hat did not cooperate with Oracle in the manner it deemed appropriate, Oracle launched a Linux technical support business, based on distributions of Oracle Linux (a copy of Red Hat Enterprise Linux), but undercutting Red Hat's pricing structure. Red Hat seems to be doing fine. But Oracle's move was far removed from the notion of participating with a partner in a community from which Oracle directly benefits.

So how will Sun employees fare, once the takeover is completed? The 8K filing suggests the only risk is a prolonged delay in the takeover process. Let's hope for a vigorous recovery and new life for existing Sun business units. But I doubt Sun employees should try to take that 8K statement to the bank as a guarantee.

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