Sun to cut up to 6,000 workers

November 14, 2008 11:54:23 AM PST
Tech giant Sun Microsystems announced its cutting 6,000 jobs. It's a move to keep Sun afloat. But some analysts think it could actually help sink the 26-year-old company.

It's a drastic move during financially-strapped times -- Sun Microsystems has announced plans to cut up to 6,000 jobs, or 18-percent of its global staff of 33,000. Also, its software chief has resigned.

The Santa Clara based vendor of computers, computer components, software and information-technology services desperately needs to cut costs, according to Silicon Valley tech analyst Rob Enderle.

"They reported a $1.7 billion dollar loss last quarter, and so they were going to have to do something dramatic, and this is a dramatic -- a layoff of nearly 1 out of every 5 people. Companies don't do that often," said Rob Enderle, tech analyst.

The cuts should save Sun about $700-to-800 million annually, although it expects charges of up to $600-million over the next year to pay severance and other restructuring-related costs.

A Sun Microsystems spokesperson tells ABC7 that the layoffs of U.S. employees will begin in January, but Sun is not saying how many Bay Area jobs will be affected.

Enderle believes spreading the layoffs over a year's time could cripple the company.

"Because nobody knows that their job is safe, and so instead of working and making the company more competitive, more efficient, folks are working on getting their resumes ready and trying to figure out where they're going to work next," said Enderle.

Sun Microsystems has been grappling with financial problems for years now, so the nation's credit crunch just deepened the problem -- customers can't get loans to buy Sun's expensive, high-end servers - and a quarter of its business comes from the struggling financial services sector.

"With the economy the way it is, companies are not buying as much as they intended to buy," said Enderle.

The hope is federal government stimulus programs will help soon. But for now, Sun Microsystems and many other big Silicon Valley tech companies are hurting. Cisco Systems, Intel, National Semiconductor and Applied Materials have all released figures showing significant drops in profits and projected revenue.


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