Sun Microsystems could lay off up to 15 percent of its workforce to help reduce costs and offset the slowdown in technology spending that has punished the company in recent quarters, an analyst wrote Thursday in a report.
Sun has avoided layoffs to date, making it a rare exception among fellow hardware makers such as Hewlett-Packard Co., Compaq Computer Corp., and Dell Computer Corp., all of which announced layoffs earlier this year. Sun has seen its revenue slump significantly this year and could now join its peers with layoffs.
"In light of a somber outlook for both IT and telco spending, it is becoming likely, perhaps certain, that Sun will layoff employees," said Toni Sacconaghi, an analyst with Sanford C. Bernstein & Co., in a report. "Current quarter consensus revenues are expected to be only 64 percent of Sun's peak, yet the company has more employees now (than) at its peak. Our analysis of 13 large-cap technology companies that have had similar erosion in sales to Sun's show that, on average, they have announced layoffs of 24 percent of their workforces."
Sun executives have said that they will continue to spend money on research and development even in the tough times and would try to avoid layoffs. The company forced workers to take time off in July, attempting to curb spending.
Sun currently employs over 43,000 workers, but Sacconaghi expects Sun to lay off between 10 percent and 15 percent of its workforce.
"Demand for Sun products continues to be very weak, especially overseas there is no expectation for a rebound through at least calendar year-end, and no visibility beyond that," Sacconaghi wrote in the report.
Sun didn't immediately return calls seeking comment.
Sanford C. Bernstein & Co. lowered its outlook on Sun's 2002 fiscal year outlook, predicting the company will pull in US$14.3 billion in revenue or $0.10 per share. These figures include the expected headcount. The company claims Sun's earnings per share for 2002 would be negative without a "material reduction in headcount."
Sun reported fiscal year 2001 revenue of US$18.25 billion in July.