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Sun freezes jobs, steps up cost cuts

Catch your Breath memo

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Sun Microsystems has introduced a recruitment freeze and stepped up its cost cutting programme in response to a slowdown in demand for its products.

According to sources, Sun has told managers throughout the firm to drop any plans to bring in new employees.
An internal memo, obtained by The Register, on the cost cuts(taking place in parallel with the job freeze), gives an insight into the thinking of Sun CEO Scott McNealy.

In the memo, he explains why the firm is tightening its belt, even though it recently reported revenues up 44 per cent in Q2.

He admits that a slowdown in demand at the back-end of last year had taken the company somewhat by surprise and "now we have to make some temporary course corrections".

"As growth slows, even if it's from 60 per cent to 40 per cent, you need to catch your breath and make sure that expenses are in line with revenues," he said.

McNealy said members of Sun's executive management group will be asked to "review budgets closely and to provide your management with direction on reasonable cost-cutting measures", which he suggested would be temporary.

Despite talk of serious cut-backs, which go further than those previously discussed, McNealy's naturally-bullish and combative approach is more than evident in the memo.

"Analysts and other market watchers have set a very high bar for us. When we don't clear that bar, no matter what the reason, nay-sayers, especially our competition, question our corporate vision or ability to execute. Believe me, they couldn't be more off-base."

A reorganisation is the US service provider market and combined with a overall cooling of demand to clip the wings of leading suppliers to the telecoms market like Sun and Cisco.

News of the spending cuts comes against the backdrop of comments made a couple of weeks ago by CFO, Michael Lehman, that Sun is targeting annual sales growth of between 20 to 35 per cent for the next two to three years, far lower than historical growth rates of more than 50 per cent. ®

Related stories:
Sun posts strong Q2 figures
Sun and HP launch cost-cutting programs
Sun is top dog in Unix market
Recruitment freeze at networking giant Cisco

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