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Sun to Slash Jobs as Sales Fall

September 18, 2003|From Bloomberg News

Sun Microsystems Inc. of Santa Clara, Calif., which has had nine straight quarters of falling sales, will eliminate as many as 1,080 jobs, or about 3% of its workforce, to concentrate on products and services that are doing well.

The maker of server computers will cut jobs in all regions, spokeswoman May Goh Petry said in an interview. "The bulk of changes will occur in the current fiscal quarter, though some units will have action in the second and third quarters," Petry said. She declined to say which units would be affected. Sun had about 36,000 employees as of June, she said.

Sun, under Chief Executive Scott McNealy, has cut 7,300 jobs in the last two years. The company is adjusting to reduced spending by customers and lower-cost products from competitors including Dell Inc.

Sun hasn't said when the revenue slide might end.

"Their competition is very formidable and they're being hit on multiple fronts," said Art Rutzen, chief executive of SDR Capital Management, which oversees $500 million and holds Sun shares. "They've got to tighten costs and reposition their focus on businesses" that are likely to have higher sales.

Sun specializes in large servers that can cost more than $1 million to tackle companies' biggest computing chores. In the last few years lower-cost machines using Intel Corp. chips and Linux or Microsoft Corp. operating systems have stolen sales from Sun.

Revenue from Intel-based systems will exceed that of servers using proprietary chips such as Sun's for the first time this year, Gartner analyst Jeffrey Hewitt predicted. At the same time, high-end offerings from IBM Corp. have forced Sun to cut prices on its top-of-the-line products, analysts have said.

Sun also has been buffeted by falling corporate profits, which have led customers to cut computer-related spending. Sun has reacted by expanding its product line to include servers that run Linux and Intel chips, as well as other lower-cost machines that use its UltraSparc chips and Solaris operating system.

Sun shares fell 2 cents to $4.02 on Nasdaq. They have risen 29% this year.

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