14 DAY TRIAL // Sun Microsystems is going to fire a massive part of its current 34,219 employees as the first stage of a restructuring plan that will be rolled out by the middle of the year 2008. The company expects to pay an estimated $100 million to $150 million on severance packages for its fired workers, but declined to specify exactly the number of employees it will lay off or the exact departments that will be the most affected by this measure.
After a good fiscal quarter, when Sun Microsystems regained its profitability, having a total profit of $329 after a long string of bad years, the company management sees the job cuts as a way to "better align the company's resources with its strategic business objectives," according to the Sun's statement cited by the news site News.com. At a conference call with investors, the company chief executive officer, Jonathan Schwartz, said the profits registered during this fiscal quarter were somewhat lower than expected and that he is expecting Sun Microsystems to steadily increase its revenues during the fiscal year 2008. "Based on the timing of product introductions, we expect revenue growth to be a bit higher in the second half of the year, relative to the first half," Schwartz said. "We expect gross margins to be in the range of 43 percent to 46 percent."
About the projected and anticipated job cuts, the Sun CEO said that the company must be resized in order to allow for "long-term growth and profitability" and that is possible only by reducing costs and "streamline operations. This action is just as much about increasing operational discipline as it is about mapping the company's spending to its priorities".
According to some analysts cited by the news site ComputerWorld, Sun Microsystems needs the job cuts because it registered a drop in revenues despite last quarter?s profits. "What you want to see is an incline in volume and solid profitability; that's where your earnings take off," said Joe Clabby, president of Clabby Analytics. "By cutting costs, you can produce a nice little profit for one quarter, but without the volume, it's unsustainable."