Sun Microsystems faces 'meltdown' threat

Published on Saturday 15 November 2008 13:24

COMPUTING giant Sun Microsystems could not confirm yesterday whether the 900 jobs at its Linlithgow server plant were under threat after announcing 6,000 job losses worldwide, a cut to its workforce of 18%.

The Linlithgow plant employs 600 full-time staff, plus 300 contractors.

Sun reorganised its software division and software executive vice-president Rich Green is expected to leave as the firm said that it hopes to save between $700m and $800m a year from the changes.

Toni Sacconaghi, an analyst with Sanford Bernstein, said in a circular on Friday that Sun could raise margins by 7% and earnings by $1 a share if it were willing to cut 20% of its workforce. He also said Sun may need to sell a controlling stake to right the business.

One report emerging from the US is that the economic downturn might be pushing Sun to the brink of extinction. The company's servers and software helped stimulate the internet boom, and its engineering acumen is revered. But Sun never recovered from the dotcom meltdown, say some technology analysts, and it has been overtaken by big shifts in the way businesses buy their back-end computers

Other giant tech firms, such as Intel and National Semiconductor, have reported falling sales, and server maker Cisco said this quarter's sales may be weak. Sun, the fourth-largest server maker, could lose more than its competitors as its Wall Street customers slash technology spending, officials said.

The company has battled a slow decline in server sales for years. Sun cut jobs in May and said more cuts were likely after a $1.6bn first-quarter loss, its second time in the red in three quarters.

Analysts at Gartner said Sun's share of the server market was 11.8% in the second quarter against 13.6% at the end of the year and its stock has fallen 80% this year.

Sun said it intends to shift its focus to software.