Before the markets opened on Wall Street this morning, Sun Microsystems did what most of us expected it would soon do after years of flatline revenues and a lack of profits or losses in many quarters: slash the employee headcount again, and this time a little deeper to appease investors and to get back to profitability.
Sun said that it would eliminate between 15 and 18 per cent of its 33,400-strong workforce, which works out to approximately 5,000 to 6,000 employees. The company also announced that it is restructuring itself into three different divisions, which involves breaking its newly created Software Group into pieces and spreading bits of it into the new Systems Platforms, Application Platform Software, and Cloud Computing and Developer Platform groups at the company.
Rich Green, who headed up the Software Group, has left the company. Green is a long-time Sun executive who was in charge of Java, among other things, and who left for a brief stint at virtualization management software company Cassatt. Jonathan Schwartz, Sun's president and CEO, brought Green back to Sun in the summer of 2006 to run Sun's software business, which was in the midst of open sourcing everything and trying to shift to an open source distribution and commercial support business model akin to that used by Linux distributors.
"Today, we have taken decisive actions to align Sun's business with global economic realities and accelerate our delivery of key open source platform innovations - from MySQL to Sun's latest Open Storage offerings," explained Schwartz in a statement announcing the layoffs and the company restructuring.
According to Sun, the job cuts remove between $700m and $800m in costs from the company ledgers, which, provided that Sun's revenues hold at around $3bn or so per quarter (not a done deal given this economy and such large employee reductions), should put the company in the black. Sun expects the layoffs to cost somewhere between $500m and $600m over the next twelve months, with an estimated $375m to $450m in costs hitting the books in Sun's current fiscal 2009 year. The company added that it expects to see the benefits of cost savings starting in the third fiscal quarter, which runs from January through March of 2009.
As part of the restructuring, Sun will hunker down into three units, all headed up by three familiar executives. John Fowler, who has been running the Systems Group for a few years, now runs the Systems Platforms group, which includes the Solaris operating system, the virtualization hypervisors xVM and VirtualBox and various systems management software as well as Sun's server and storage lines. This group will continue to generate the vast majority of Sun's revenues, and at the moment there really aren't much profits to speak of.
Sun has also tapped Anil Gadre, formerly its chief marketing officer, to be the executive vice president in charge of the Application Platform Software group, which bundles together Java, MySQL, GlassFish, and other open source middleware products as well as Sun's learning services training organization.
Dave Douglas, who ran the Sun Grid utility computing effort a few years back, is now senior vice president in charge of the Cloud Computing and Developer Platforms group. This group includes the Network.com cloud (we don't call them utilities any more, remember) as well as the NetBeans developer tools and the StarOffice office automation suite. (Yes, StarOffice belongs in the application group above, but that's office politics.)
A lot of heads seem to be rolling in the marketing department as part of the restructuring. Sun said in its statement that it is moving marketing closer to the sales and product organizations. Peter Ryan, executive vice president of global sales and services, is now in charge of of field and partner marketing; specific product and technology marketing will be pushed down into the three groups. Overall corporate marketing will be done by Ingrid Van Den Hoogen, now a senior vice president and reporting directly to Schwartz.
With so many heads rolling at Sun, the obvious question - and the one that Sun has not yet answered - is where are the cuts being made and what projects and products did not make the cut. On the server front, it is hard to imagine that the future "Supernova" servers and their "Rock" UltraSparc-RK processors made the cut, and it is a lot easier to imagine that Sun will just sell the future Fujitsu Sparc64 product line from here on out. But, maybe Sun has other plans. The low-end Sparc T series machines are making money and growing, so they would seem to be safe, and it is hard to imagine Sun backing out of the x64 server racket, despite its difficulties. ®