Another restructuring for Sun as results disappoint

16 April 2004 Sun Microsystems has again reshuffled its top management and announced yet more lay-offs after another quarter of heavy losses.


Sun posted a net loss of $760 million, compared with a slim net income of $4 million achieved a year ago. About $500 million included a charge to cover tax liabilities and the restructuring. However, this still leaves a loss of $260 million.

Revenue also declined for the twelfth consecutive quarter, by 5% to $2.65 billion, compared to $2.79 billion achieved in the same period a year earlier. Some analysts have suggested the decline was actually nearer 10% when the sharp decline in the value of the US dollar is taken into account.

In the management reshuffle, the two executives in charge of servers, Neil Knox and Clark Masters, will leave their posts, along with chief strategy and marketing officer Mark Tolliver. Only Masters, currently executive vice president of high-end Unix servers, will stay with the company, moving to the governmental customer sales department.

They will be replaced by two existing Sun executives, microprocessor chief David Yen and software Chief Technology Officer John Fowler. Both will add their predecessors’ responsibilities to their current duties.

Meanwhile, Andy Bechtolsheim, one of Sun’s founders, will return as a senior vice president and chief architect of the company’s network systems group.

The reshuffle follows the elevation of executive vice president of software, Jonathan Schwartz, to the role of chief operating officer and president, and the layoff of 3,300 other staff — 9% of Sun’s total workforce. Sun is also combining some of its units to cut costs, and discontinuing the development of its UltraSparc V and Gemini server chips.

Sun has been losing considerable market share in its core server hardware business to cheaper offerings from rivals, particularly Dell and IBM. Sun’s Solaris Unix operating system is also declining in the face of withering competition from Microsoft Windows and, in particular, Linux.

In spite of an overwhelmingly negative reaction to the results, CEO Scott McNealy claimed to be looking to the future with optimism. He argued that “our momentum in Q3 is stronger than the financials might indicate”, citing the $2 billion cash injection from its antitrust case settlement with Microsoft, which is not reflected in these earnings, and a line-up of new products that is “stronger now than in the past 10 years”.

“The $7.5 billion in cash takes the viability thing and makes it a ridiculous question,” he added.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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