Sun Posts $111 Million Loss, To Cut 4,400 Jobs

The computer and software maker will cut 4,400 of its 39,400 employees in a move that has been expected because corporate technology spending has not rebounded as expected.

It's the second major round of cuts at Sun, which a year ago cut 10 percent of its work force, or nearly 3,900 jobs, after holding out longer than other high-tech companies to make staff reductions.

Scott McNealy, Sun's chief executive, said he was slow to cut jobs because of the difficulty in replacing talent once the economy rebounds. Such a quick recovery is now seen as unlikely.

The latest round of cuts will affect employees around the world, with U.S. jobs expected to be lost in November. The company declined to say how its various divisions would be affected individually.

"Sun has done an outstanding job in maintaining fiscal discipline, but it hasn't been enough to counterbalance revenue shortfalls caused by the protracted economic downturn," said Steve McGowan, Sun's chief financial officer.

For the three months ended Sept. 29, Sun lost $111 million, or 4 cents per share, compared with a loss of $180 million, or 6 cents per share, in the same period last year.

Excluding special items, the company lost $78 million, or 2 cents a share, compared with $158 million, or 5 cents per share at the same time last year.

Analysts were expecting a loss of 4 cents per share on sales of $2.87 billion, according to a survey by Thomson First Call.

First-quarter sales were $2.75 billion, down 4 percent from the $2.86 billion posted in the same period last year.

"The uptick we expected in the last couple weeks in September didn't really materialize," McGowan said.

Sun's growth in the late 1990s was driven by the need for reliable hardware and software as companies ranging from banks to dot-coms needed systems to make their online plans come true.

The company offered proprietary systems that included Sun's Sparc microprocessors and Sun's Unix-based Solaris operating system.

But business quickly dried up as the dot-coms collapsed and larger companies cut back technology spending.

Some analysts believe Sun may be in trouble beyond the economy, as its competitors offer Unix systems built not on custom hardware like Sparc but standard, increasingly powerful chips from Intel Corp.

It's similar to how Apple Computer Inc.'s Macintosh computers run on non-Intel chips and a different operating system from the rest of the PC world.

"Sun risks becoming the Apple of corporate computing, cool but less relevant," Merrill Lynch analyst Steve Milunovich said in a research report this week.

Sun executives say the company continues to gain market share among Unix servers. Overall, however, Unix is losing share to Microsoft Corp.'s Windows and the open-source Linux operating system, Milunovich said.

In recent months, Sun has started offering lower-end systems based on Linux. Milunovich said the endorsement has been tepid because Sun also is selling Solaris.

Still, Sun has more than $10 billion in annual sales and nearly $6 billion in cash.

"We believe the real question is not viability but relevance," Milunovich said.

Sun released its results after the markets closed. Shares of Sun rose 19 cents, to close at $2.99, in Thursday trading on the Nasdaq Stock Market. In the extended session, they gained another 8 cents.

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