Sun To Cut 18% Of Jobs, Reorganize Software Business

Rich Green, executive VP for software since 2006, will leave the company, and the company's software operations would be divided between two new groups now focused on open source products.
The latest round of layoffs is part of a trend that started in 2006, which marked Sun's first major round of job cuts. Josh Farina, analyst for Technology Business Research, expects to see a significant reduction in staff in research and development on the hardware side of Sun's business. "Whether or not it's going to be enough is too soon to tell," Farina said of the job cuts and reorganization.

Sun competes with much stronger players, Hewlett-Packard and IBM, in the high-end server market. Starting in the fourth quarter of 2006, Sun has seen a decline in unit sales each quarter, according to TBR. Sun's revenue in the market has been falling steadily since the third quarter of 2007. Sun has seen growth in the lower end of the market, where it competes with the same two companies, along with Dell. The growth, however, hasn't been enough to offset the losses.

Farina believes Sun's focus on open source software linked to hardware could pay off, particularly with the $1 billion acquisition of MySQL AB in January. With the purchase, Sun got the popular MySQL database.

"If Sun can get their foot in the door and talk to these customers and up-sell them software and hardware, then that could be a great comeback story," Farina said. "But I haven't seen Sun do that yet."

If Sun's growth strategy is to work, then it will need time, something the company may not have. Southeastern Asset Management, a Tennessee investment firm, has bought 21% of Sun's stock and said last month that it plans to have discussions with Sun "and/or third parties" about raising the company's stock value, The San Jose Mercury News reported.

Sun is not the only tech company to suffer in the economic downturn. Other companies that recently announced layoffs include Applied Materials, National Semiconductor, and Advanced Micro Devices. Chipmaker Intel this week lowered its outlook for the fourth quarter, saying revenue could fall as much as 19% as consumers and businesses cut back on tech spending.