Strategy

Sun Sets on More Jobs

Growth plans at Sun Microsystems are in place, but job cuts still loom.
Stephen TaubAugust 8, 2007

Sun Microsystems said it will reduce its workforce, enabling it to save $100 million to $150 million over the next several quarters. However, it did not provide the exact number of positions it plans to eliminate. Since June 2006, Sun has cut about 4,000 jobs through layoffs and attrition. Sun has been aggressively reducing costs since Jonathan Schwartz took over as chief executive from co-founder Scott McNealy in April 2006, noted a report in the Associated Press.

The high-end computer maker, which generates $14 billion in annual revenues, also announced several governance changes. Most significantly, it plans to decrease the size of its board from 11 directors to 10 members.

Sun CFO Michael Lehman forewarned investors about coming job cuts in May 2006, when he told attendees at a San Francisco technology conference that the company was “ready to resize.” Without being more specific, he affirmed that the number in question would be less than the “outlier” estimate of 10,000 suggest by an industry analyst, reported the San Jose Mercury News at the time.

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Lehman came out of retirement just three months before he made the announcement, replacing the retiring Steve McGowan. Lehman had held the top finance spot at the company between 1998 and 2002, then retired and served on the company’s board, until he returned to the CFO post.

Some observers say that Sun’s main revitilization focus is not on cost cutting, but rather on growth. For example, CFO.com sister publication, The Economist, recently noted that, “Surprisingly, Sun’s resurgence appears to be based not only on the boring stuff of lay-offs and cost-cutting, but also on a vigorous plan to grow in an industry that is supposedly stagnant.”

In still another effort to boost shareholder value, Sun announced in May that its board authorized the repurchase of up to $3 billion worth of its shares, or nearly 16 percent of the total of equity outstanding. The company explained that the repurchase plan is designed to increase shareholder value and reduce the dilutive effect of its equity-compensation programs. “With over $5.4 billion in cash and marketable debt securities, we have maintained a strong balance sheet and feel confident that this program will allow us to further pursue strategic opportunities for growth,” said CFO Mike Lehman.