Sun Microsystems Inc. (NASDAQ: JAVA) just can’t get it right. The focus of the business is elusive and it seems that nothing it embarks on works. Actually, it doesn’t seem that way. It is rather obvious that is is that way. This morning, the company has announced that the board of directors approved a giant layoff restructuring plan (two days ago).
The tech-dog has put 5,000 to 6,000 employees in the gallows. Sun expects to incur total charges of $500 million to $600 million over the next twelve months as a result of the plan related to cash severance costs. It also noted that about $375 million to $450 million of the total charges will be incurred in the fiscal year ending June 30, 2009. That means the firings are coming sooner rather than later.
Sun’s goal is to save roughly $700 million to $800 million, and it expects to start seeing the savings in the third quarter of the 2009 fiscal year. A substantial portion of the savings should be seen by the first quarter of the firm’s fiscal year ending June 30, 2010.
It appears that Sun still magically has almost 35,000 workers, so roughly 15 out of every 100 workers are going to get severed here. The problem is that this is yet another restructuring on top of another restructuring on top of another restructuring. This isn’t working.
Perhaps management should try something radical like a reverse stock split and a stock symbol change to get away from its past. Oh, wait. It already tried that, and it has been miserable ride ever since.
We do not go out attacking management for no reason. We cannot blame the economy on any CEO and we cannot blame sector woes on any CEO. But this company has had almost nothing but a series of poor decisions. If management was objective, it would determine that no member in the ranks is up to the tasks and challenges ahead. It is time for entirely new blood to come in here. The star chamber needs to pass judgment on itself.
If Sun stays on the path it has been on, we won’t be surprised if more layoff announcements come down the pipe again. The sun sets every day, but it sets twice a day at the company’s headquarters.
Jon C. Ogg
November 14, 2008
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