Sun Microsystems Inc. said it would cut up to 5,000 jobs and exit several facilities in Silicon Valley in the hope of restoring profit

Sun expects to increase investment in core technologies and channel resources, while accelerating its exit from what the company terms as non-core businesses. The goal is to bring operating income up to 4 percent of revenue by the fourth fiscal quarter of 2007.

To achieve this, Sun said it would slash its workforce, now at 37,500, by as much as 13 percent. In addition, the company said it would sell its Newark, Calif., campus while exiting leased facilities in Sunnyvale. The company will continue to operate two major centers in Menlo Park and Santa Clara.

During a conference call with analysts, CEO Jonathan Schwartz acknowledged the cuts would be difficult for Sun employees, but said he remains "convinced [the cuts] will yield a more profitable company."

Schwartz added that Sun would eliminate duplicate and redundant management functions while simplifying product lines and ending duplicative R&D efforts.

The job cuts alone are expected to save $450 million to $550 million annually, with total cost savings estimated at $480 million to $590 million. Sun expects to incur restructuring charges of $340 million to $500 million over the next several quarters, with the bulk of the charges to be incurred in the fourth fiscal 2006 quarter ended June 30.

For Sun, the restructuring is the first significant action taken under Schwartz, who replaced longtime CEO Scott McNealy in April.

By: DocMemory
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