Sun Slashes Jobs, Sets Restructuring

Sun takes drastic steps to tackle a tough economic climate

Troubled tech giant Sun Microsystems (JAVA Quote - Cramer on JAVA - Stock Picks) on Friday announced plans to cut up to 6,000 jobs, or 18% of its global workforce, as the company attempts to breathe life back into its business.

The company, which faces stiff competition from IBM (IBM Quote - Cramer on IBM - Stock Picks) and Hewlett-Packard (HPQ Quote - Cramer on HPQ - Stock Picks), is struggling with falling sales and an increasingly tough economic climate, prompting drastic action from chief executive Jonathan Schwartz.

"Today, we have taken decisive actions to align Sun's business with global economic realities," said Schwartz, in a statement.

The job cuts aim to reduce Sun's costs by $700 million to $800 million a year, and will affect between 5,000 and 6,000 of the company's workers.

Over the next 12 months, Sun expects to incur restructuring charges between $500 million and $600 million, of which $375 million to $450 million will be within the company's current fiscal year 2009. Sun expects to start realizing cost savings in the third quarter of fiscal 2009.

The news did little to bolster the company's stock. Sun's shares fell 17 cents to $3.91 in early trading.

In its fiscal first-quarter results, announced last month, Sun posted a $1.7 billion net loss, along with a hefty writedown. During the quarter, Sun's sales of computer systems fell 15% year over year, while sales of storage systems grew a scant 0.4%.

This is not the first time that Sun has slashed its workforce in an attempt to boost its bottom line. The company has made a number of efforts to streamline its business in the last few years, including 1,500 job cuts earlier this year.

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