Sun Microsystems Inc. plans to cut up to 6,000 jobs, or 18 percent of its global work force, as sales of its high-end servers have collapsed. That's about one in five workers.
The drastic move announced Friday highlights Sun's desperation to cut costs and survive as an independent company. Sun's shares have fallen so steeply they've crossed an ominous threshold, driving the company's market value below its cash on hand.
Its shares fell 9 cents, or 2.2 percent, to $3.99 in premarket trading Friday.
The Santa Clara, Calif.-based company said the job cuts will include between 5,000 and 6,000 employees over the next year. The cuts should save an estimated $700 million to $800 million annually.
Sun expects charges of $500 million to $600 million spread out over the next twelve months to pay severance and other restructuring-related costs.
Sun also said its software chief, Rich Green, has resigned.
"These are hard but necessary changes," Jonathan Schwartz, Sun's chief executive, said in an interview.
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He said the company has been deeply wounded by the credit crunch, because customers can't get loans to buy expensive servers. A quarter of the Sun's business comes from the ailing financial services sector.
Sun shares closed Thursday at $4.08, giving Sun a market value of $3.01 billion. At the end of September, Sun had $3.1 billion in cash on hand. The gap indicates the market's perception of Sun is so poor the company's worth less than its horde of cash and short-term investments, a grim sign about Wall Street's optimism about the company's prospects.
Sun posted a loss of $1.68 billion in the latest quarter, ended Sept. 28. It also wrote down the value of the business by $1.45 billion. The huge goodwill impairment shows how badly Sun's reputation has been hurt in recent months as the credit crunch has strangled lending and sales of its most expensive and profitable products have plummeted.
