Will SUN Survive after Restructuring due to Global Financial Crisis

SUN MICROSYSTEM is now going through a very difficult phase after financial meltdown all over the world. It did not recover fully from  the dot-com crisis as of yet.  They planned to cut 6,000 jobs, or 18 percent of its global work force. Sales of high end servers, specially for financial sectors fell 27 percent in the latest quarter and that made a big dent in their revenue. The cuts should save an estimated $700 million to $800 million annually.

The latest layoff follows the other big layoffs in the last three years that eliminated 7000 jobs. Sun said the job cuts will touch 5,000 to 6,000 of its 33,000 employees over the next year. The SUN share went up by 4 cents, or 1 percent after company restructure. Sun realized long before that its customer base is shrinking. That’s why they tied up with Intel and Microsoft. As per the latest IDC analysis, Sun occupies 11.2 percent of the overall server market, way below No. 1 IBM, which holds 33.2 percent, followed by HP and Dell.

The Software chief, Rich Green, has resigned after SUN announced the split of its business into three groups. One is Java programming language and open source database for which SUN sells support service. The second one is Solaris operating system that runs on serves. The last one is Cloud Computing. SUN argues that the cut is needed to get around the Financial turmoil that has also trimmed the workforce for big companies like Intel and Cisco System. Sun underscored the stress on Open Source Software because lot of big enterprises adopting it as a cost cutting measure.

“They still have strong cash on the balance sheet, and they’re still generating free cash flow, so they’re not dead yet, but the patient is definitely on the respirator,” said Rick Hanna, an equity analyst with Morningstar Inc

Source: Yahoo News

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