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Sun slashes (another) 3,000 jobs

EC fiddles while Sun burns

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Sun Microsystems doesn't want to talk to anyone anymore unless it has permission from Oracle, but the Securities and Exchange Commission has funny rules about disclosure that mean it has to tell investors - the ones who still own Sun's shares - what it is up to. And this afternoon, after Wall Street closed, Sun filed a report with the SEC saying that it was slashing jobs as it awaits the closure of the acquisition of the company by Oracle.

Oracle said it would pony up $7.4bn back in April to acquire Sun, and net of cash as of the end of the September quarter Oracle's net payout to get Sun would be about $5bn. Provided Sun doesn't blow all of the cash it has on hand keeping the doors open.

The US Department of Justice has approved the acquisition - these are the same people that can get a grand jury in America to indict a ham sandwich, so that ain't saying much - but the European Commission's antitrust police are a bit concerned that Oracle is getting its hands on the open source MySQL database as part of the deal and has held up its approval of the Oracle-Sun deal.

And according to Oracle chief executive officer, Larry Ellison, Sun is losing $100m a month as it waits for the EC to give the deal the nod. You can blame the EC all you want, but Sun's numbers started heading south as soon as it became public knowledge in March that the company was in play, and that, not the economic meltdown, is the main reason why Sun's sales were off 30.6 per cent in the quarter ended in September, to $2.62bn and the company posted a net loss of $147m.

All of that is a moot point to the 3,000 Sun employees who are going to get the ax now that Sun's board of directors has approved a restructuring plan to eliminate their jobs. According to the 8K filing with the SEC, the layoffs are a direct result of the delay in the closing of the acquisition of Sun, and the company's workforce will be reduced in North America, EMEA, and in the Asia/Pacific regions as well as in emerging markets over the next 12 months.

Sun didn't say where they job cuts would be by region, company division, or job type, but it did say in its filing that the layoffs would force Sun to book charges of between $75m and $125, over the next several quarters. The company added that the bulk of the costs are cash severance payments to the fired employees and that it would incur most of the charges in its second and third quarters of fiscal 2010. (That's the quarters ending in December 2009 and March 2010.)

It is interesting to note that Brian Sutphin, executive vice president of corporate development and alliances, signed the document. There's no sign of Sun chairman, Scott McNealy, nor president and chief executive officer, Jonathan Schwartz. And there was certainly no wind of any such layoffs last week at the Oracle OpenWorld love-in.

Remember, Oracle is going to invest more in Sun technology than Sun did. That may not be all that hard, once this is over.

In November 2008, just as Sun and rival IBM were just starting to parley about some kind of deal, perhaps an acquisition of Sun by Big Blue (but none of us knew about that at the time because it was a secret), Sun announced that it would slash between 5,000 and 6,000 of its 33,400 workforce, eliminating between $700m and $800m in costs and causing Sun to book charges of $375m to $450m in fiscal 2009.

It is widely believed that all of those layoffs have been done, but Sun never said how many were accomplished. Call it 6,000. Add another 3,000, and Sun's workforce is down around 24,000 people. And once Oracle does acquire Sun, you can bet the numbers will get even lower. There is no other way for Oracle to extract $1.5bn in operating earnings from Sun in the first full year of the deal, as Oracle continues to say it can do.

If Sun had made the job cuts that are inevitable after the Oracle deal closes - and it close will because there is no where else for Sun to go - plus the cuts it has already made on its own in the past year, it is conceivable that Sun would be a smaller, but slightly profitable and freestanding IT supplier, one with a real chance to grow and be truly profitable again. If the Oracle deal comes undone over something as relatively small as MySQL, Sun may yet get the chance to get a lot smaller all by its lonesome. ®

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