Sun Chief Calls Layoffs Difficult but Necessary

In a video posted on his corporate Web site, Sun Microsystems CEO Jonathan Schwartz described the decision to reorganize the high-end hardware and software vendor and lay off nearly 6,000 workers as a difficult but necessary decision for the future of the company.

“Our customers are facing very difficult conditions,” Schwartz said. “They too are seeing depressed consumer spending. That ultimately gives them an opportunity to make infrastructure improvements. But we’re seeing customers placing purchase orders on hold. We’re not the only company seeing it.”

Spurred by a nearly $2 billion quarterly loss, Sun Microsystems announced today a massive restructuring of its business into three divisions that will result in the cutting of up to 18 percent workers around the world.

“Today, we have taken decisive actions to align Sun’s business with global economic realities and accelerate our delivery of key open-source platform innovations – from MySQL to Sun’s latest Open Storage offerings,” said Schwartz, in a statement.

In the video, Schwartz indicated that Sun would use the anticipated $700 million savings from the restructuring and layoffs to invest in new technologies and products, mostly around open-source software, cloud computing and next-generation data centers.

Schwartz said Sun has become too difficult to do business with, and the restructuring would make the company both a better supplier of technology and partner to its resellers and customers.

Under the plan, Sun will collapse its organization into three primary business units: Application Platform Software, Systems Platforms and Cloud & Developer Platforms.

Sun’s layoffs and restructuring come just weeks after it announced a $1.68 billion third-quarter loss. It was a huge reversal from the same period in 2007, when the high-end hardware and software company reported an $89 million profit.

The company says that falling demand for high-end hardware is behind its losses and forcing budget and staffing cuts. The layoffs, which will eliminate as much as 18 percent of Sun's work force, will save the company $700 million to $800 million. The company will incur a charge of as much as $500 million as a result of the layoffs and restructuring its software division.

The company said the reorganization and reduction in work force would be globally distributed, but provided few other details. “We are not providing details about geographies or functions at this time,” a spokesperson said in an e-mail.

How the reorganization will impact Sun’s channel program and its 3,000-strong partner community remains unknown. The company did announce that product and technology marketing will be integrated into the product groups and partner marketing will fall under Peter Ryan, executive vice president of global sales and services.  

Home to Java, MySQL and the Solaris operating system, Sun was rebounding in recent years under the leadership of Schwartz. In 2006, the company reorganized under four primary business units: systems, storage, software and services*. Green and energy-efficient computing have been a particular emphasis, as the company has debuted hardware with better power and cooling designs.

The real business driver behind Sun has been fueling the Web 2.0 world. Sun bet that the Web 2.0 world would need high-end servers and storage to enable efficient and feature-rich, cloud-based applications.

Under the restructuring plan, Sun will have three primary business units:

>> Application Platform Software will include all software from databases to business integration services. Most notably, Sun’s Java scripting software and MySQL open-source database products will fall under this division.

>> Systems Platform will include the open-source Solaris operating system, virtualization technologies (xVM and VirtualBox) and systems management software.

>> Cloud Computing and Developer Platforms will include all Web-based technologies and services, the NetBeans development platform and the StarOffice portfolio.  

“Technology is going to continue to play an exceptionally important role for business, for society, for academia, for health care, and Sun is going to be a core supplier for those environments,” Schwartz said in the video. “We see a bright future in front of us.”

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