Sun layoffs to have little impact locally

Sun's announcement that it will cut between 4000 and 5000 jobs globally in the next six months will have minimal impact in Australia, the company's local managing director Jim Hassell said today.

"We expect the impact of this announcement locally to be low, as most of this will be in the US," he said, adding that it is business as usual.

"We continually rebalance our workforce to the needs of the market. As part of this overall program globally, Sun is seeking to rebalance its workforce and we expect that during the next 12 months Sun will be increasing its sales and technical expertise in the field."

Sun has posted a string of losses or near break-even results over the past five years. For its most recent quarter, the company reported a loss of $US217 million. Sun said it will cut about 11 to 13 percent of its workforce, or about 4000 to 5000 employees, over the next six months. It will also sell off its campuses in Newark, New Jersey, and Sunnyvale, California, while retaining its operations in Menlo Park, California, and Santa Clara, California.

From those actions, Sun expects annual savings of between $480 million and $590 million and to incur restructuring charges between $340 million and $500 million. The charges will be spread out over the next several quarters, but most will be incurred in the quarter that ends June 30, 2006, the company said.

Sun's board also approved the company's operational goals, which include fourth-quarter operating income of at least 4 percent of revenue and longer-term operating income of at least 10 percent of revenue. The operating income and expense expectations exclude restructuring charges, but include charges related to stock-based compensation and amortization of purchased intangibles.

Other goals for the company include revenue growth in the low-to-middle single digits, gross margin of about 43 percent and operating expenses of about $5.6 billion to $6 billion for fiscal 2007. Sun's fiscal year begins July 1.

The move comes on the heels of one of the first major executive realignments at Sun since Jonathan Schwartz stepped in as chief executive officer in April, replacing co-founder Scott McNealy, who is still chairman. Sun last month combined its Sparc and x64-based server groups under one umbrella group, now called the Systems Group, and tapped John Fowler as executive vice president of the new group.

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