Sun To Cut More Than 15 Percent of Global Workforce

• By Herb Torrens
• 11/17/08

Sun Microsystems, a leader in Java and open source technologies, put market "speculation to rest" Friday. CEO Jonathan Schwartz announced that the company is realigning itself to "adapt to the new economic reality."

That reality, according Schwartz, is the world economy is shrinking. Sun customers are putting purchase orders on hold. As a result, Sun will reduce its global workforce by 5,000 to 6,000 employees in the next year, which equates to 15 percent to18 percent of its workforce.

"There's been a lot of speculation about Sun in the marketplace," Schwartz said in a video presentation announcing the company's realignment. He said red flags began to go up earlier this year when a major investment bank failed and a "weakness in the economy" spread from the United States to Europe and beyond.

"Our assumption is that the current [economic] environment we're in isn't going to be changing anytime soon," Schwartz said in the video. "In order to adapt our business model to this new economic reality, we are going to be making a series of relatively difficult but necessary changes."

In addition to the job cuts, Sun is creating new business groups for its software organization, according to a company statement. The new groups include Application Platform Software, Systems Platforms, and Cloud Computing & Developer Platforms. Marketing efforts for products and technology will be conducted by the individual groups, according to the plan.

Along with changes at Sun, Rich Green, former executive vice president of software, announced he was leaving the company. His bio was no longer posted on the Sun Microsystems Web site early Friday afternoon.

The restructuring plan, approved by the board of directors, is aimed at reducing annual overhead by as much as $800 billion, according to the announcement. Sun will spend from $375 million to $450 million next year implementing the plan.

Schwartz said the company will be "disinvesting" in complexity and inefficiency, noting that "Sun has become too difficult to do business with." He said that by realigning products, organizational structure and business processes, Sun will strive to be "the easiest company in the world to do business with."

Sun Microsystems will continue to invest in areas such as cloud innovation, open source technologies and "true data centers," according to Schwartz. He said Sun will concentrate on areas that generate profitable returns, and be a "little more aggressive in areas that aren't producing returns."

"We have an obligation to our shareholders, even in the midst of a very complex and somewhat opaque global economy, to deliver the kinds of returns they deserve and expect," Schwartz said. "We are going to be making those kinds of changes starting with the restructuring we announced today."