Sun to Cut 4,400 Jobs Amid Loss
Sun Microsystems Inc. posted a $111-million quarterly loss Thursday and announced that it would cut 11% of its worldwide staff, the most aggressive move yet by a Silicon Valley bellwether to compensate for lackluster sales by slashing costs.
The layoffs -- which will begin in November and reduce Sun’s full-time staff by 4,400 -- will be supplemented by “widespread” cuts among the computer maker’s temporary and contract employees, said Chief Financial Officer Stephen McGowan. The company also will shed excess work space to save $100 million a year.
Such cuts, which are expected to touch every unit and department of the Santa Clara, Calif.-based firm, will hit California hard: 16,000 of the company’s 39,400 employees work in the state. The bulk of the California workers are based in the Bay Area.
The news marks the second major round of cuts at Sun, which shed 10% of its staff -- or about 3,900 jobs -- a year ago.
Sun, which makes computers that manage high-tech networks and Web sites, said it expects to return to profitability by June, when its fiscal year ends. Yet executives brushed aside questions by Wall Street analysts about any expectations for how Sun’s business will do in the immediate future.
“I’m so out of the forecasting game,” said Chief Executive Scott McNealy on a somber investor conference call Thursday afternoon. “It doesn’t even make sense.”
News of the most recent job cuts came amid Wall Street grumblings that the company’s expenses overwhelmed the computer server maker’s much-shrunk revenue.
Sun’s revenue totaled $2.7 billion for its fiscal first quarter, slipping 7% from the same period a year ago.
Though Sun’s sales dropped, it narrowed its loss for the three months ended Sept. 29. The company’s net loss of $111 million, or 4 cents a share, was a 38% improvement over the $180 million, or 6 cents a share, that Sun lost in the same period last year.
The loss includes special one-time charges tied to equity investments, previous restructuring charges and tax issues. Excluding these items, Sun would have lost $78 million, or 2 cents a share.
Although the layoffs are necessary, they aren’t enough to turn around Sun’s finances, Bear Stearns analyst Andrew Neff said. “What’s really the focus going forward is where revenue growth is coming from,” he said.
Industry watchers have criticized Sun’s reliance on high-end proprietary hardware and wonder if the company’s recent push into the free Linux operating system market came too late. The shift is a bid to stem a drop in sales as users seek less expensive products.
In a recent research report, Merrill Lynch analyst Steve Milunovich predicted that Sun could become “the Apple of corporate computing -- cool but less relevant.”
Sun’s shares rose 19 cents to close at $2.99 on Nasdaq.
Like Sun, chip maker Broadcom Corp. said Thursday that it would cut jobs and slash other expenses in a bid to speed up its return to profitability. The Irvine-based company said it would cut an unspecified number of jobs as part of a restructuring designed to focus on its highest-performing businesses and reduce quarterly expenses 10% to 12% by the end of the year. Broadcom employed 3,067 people at the end of the quarter.
The company will move out of less desirable product markets and review everything from facilities to travel expenses as it cuts costs, executives said during a conference call. They declined to say where cuts would be made.
Its net loss was $183.3 million, or 48 cents, for the quarter ended Sept. 30, compared with a net loss of $1.62 billion, or $6.36, a year ago. The year-ago quarter included a $1.2-billion write-off for goodwill from a dozen acquisitions. Revenue was up 36% to $290 million from $214 million.
Gateway Inc., the troubled Poway, Calif.-based personal computer maker, reported a net loss of $49.7 million, or 15 cents a share, compared with a loss of $519.7 million, or $1.61 a share, in the same period a year ago, which included a massive restructuring charge. Revenue dropped to $1.12 billion from $1.41 billion.
Although sales are expected to improve in the fourth quarter, Gateway expects its full-year revenue to hit between $4.3 billion and $4.5 billion -- lower than its earlier estimates of $4.5 billion and $5 billion.
Times staff writer Glenda McCarthy contributed to this report.
