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Sun Microsystems is firing 3,300 staff to bring costs into line with turnover. This will be a bitter pill to swallow for a much restructured workforce which today saw its employer trouser $2bn in a peace settlement with Microsoft.

Today's news accompanies a poor set of preliminary results for the enterprise systems business, which expects to lose between $200m and $260m in its third quarter ended 28 March, before the bad stuff is added. Throw in a non-cash charge of $350m for an increase in the valuation allowance for deferred tax assets, and $200m for workforce and property re-org costs and Q3 losses balloon to $750m-$810m on revenues of around $2.65bn.

Sun expects to shell out $475m over several quarters (including this initial payment of $200m) to pay for this restructure.

Sun made its first big round of redundancies in October 2001, when it axed 3,900 jobs, around nine per cent of the workforce at the time.

On the bright side (for shareholders), positive cash flow from operations this quarter should top $300m and the company expects to end the quarter with $5.5bn in cash and marketable securities. So it's not at death's door just yet.

According to Sun chief Scott McNealy, the firm has re-energised its product lines, sales channels and developer communities in the last three years. It has also made "substantial progress" in cutting cost and capacity.

"Now is the appropriate time to take cost out and drive productivity improvements in anticipation of returning Sun to sustained profitability... Continued execution of our strategies will pay-off in revenue generation over the long-run. We are well positioned with the strongest product portfolio in years, a substantial cash and market position, strong channels and partners, and a growing pipeline of customers who are demanding more Sun products and solutions."

Sun also announced today the promotion of software head Jonathan Schwartz to president and chief operating officer, effective immediately. ®

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Sun settles with MS for $2bn (ish)
Sun shuts Bristol and Cambridge offices

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