Oracle-Sun Layoff Prediction: Hold Analyst Accountable

I wouldn't know UBS stock analyst Brent Thill if I tripped over him but if it turns out he's wrong on his highly publicized report that Oracle will fire 13,500 Sun employees after the acquisition closes, Thill should have to face the music-probably including the loss of his high-level job.On the other hand, if he's right, Thill's prestige and authority should only grow because he'll have served his clients well with some heavy-duty insight that no one else was reporting or expecting. But either way, this should be a make-or-break situation for Thill because what's on the line here is more-much, much more-than just his Street-cred.

In a research note released last week that triggered a huge volume of followup coverage, Thill said Oracle's commitment to increase its own profit by $1.5 billion via the Sun acquisition will require Oracle to get rid of up to 50% of Sun's employees.

Both Oracle and Sun issued strongly worded denials, and to the best of my knowledge Thill has not followed up his original claim with any further details or comment. Sun executive vice-president Brian Sutphin sent a memo to company employees that included the following comments:

"Oracle has asked me to assure Sun employees that this report is absolutely untrue. It is regrettable that an analyst can be so irresponsible without any facts. Oracle is acquiring Sun to do something it cannot do alone--deliver complete, integrated systems. Oracle will need to rely heavily on the talents of Sun employees to achieve this vision."

Bloomberg.com, one of the first media of outlets to run an article based on Thill's report, quoted him as saying Sun could be Oracle's "toughest challenge yet" because of a range of "difficult issues" that include "a high mix of hardware revenue, shrinking revenue, low margins and potential channel conflict with long-time partners."

None of that is exactly eye-opening analysis-Oracle has been very public with its commitment to the $1.5 billion profit increase, and it's no surprise that Sun has been struggling. In that context, layoffs-as they are in every big-business acquisition-are inevitable.

But for Thill to predict that Sun will axe more than 13,000 workers means either one of two things: (a) that he has exceptional contacts within Oracle and/or Sun and that he is basing his report on top-secret but wholly accurate information; or (b) he bought into a rumor and pumped it out to get people talking. Thill didn't get to his current position at UBS by being a lightweight, and he surely must have known that his prediction of mass firings at the troubled company would grab lots of headlines and give him enormous visibility.

So good for Thill-if he's right. But if he's wrong, he will have done extensive financial damage to Sun and Oracle in their ongoing fight to sustain Sun's viability in the face of repeated raids of its customer base by IBM, Hewlett-Packard, and Dell, chronicled by Global CIO in Global CIO: Oracle Trapped By EU Politics As Sun Employees Suffer and Global CIO: Hewlett-Packard Recruits Microsoft To Raid Sun's Customers.

Less quantifiable but no less real is the personal damage he will have done to the approximately 27,000 employees at Sun, who've had to deal with plenty of uncertainty, rumor, and innuendo in the nine months since Oracle announced its intention to acquire Sun. If it turns out that Thill's information is wrong, then his decision to launch a media frenzy via his report of imminent mass layoffs will have been the height of irresponsibility for someone responsible for helping manage other people's money.

If he's right, he'll become a big-time celebrity in the financial-analysis field and will gain all sorts of enhanced credibility, job offers, and financial success. But if he's wrong, he should be held accountable for issuing such a terribly misguided report and causing damage that will be significant and long-lasting.