Schwartz Shakes Up Sun

Sun ramped up its reorganization plan last night, cutting its headcount by 5,000 and slashing its real estate footprint, although the vendor has yet to reveal what impact this will have on its storage division. (See Sun Issues Growth Plan.)

The move, which is part of a broader cost-cutting initiative, is the latest attempt by new CEO Jonathan Schwartz to leave his mark on the hardware vendor and reverse its recent misfortunes after taking over from Scott McNealy. (See Sun's McNealy Steps Down.)

Speaking on a conference call, Schwartz confirmed that Sun will be cutting its 37,500 global workforce by as many as 5,000 people over the next six months. The vendor is also selling its campus in Newark, Calif. and exiting leased facilities in Sunnyvale, Calif. The moves, according to Schwartz, will result in annual cost savings of somewhere between $480 million and $590 million.

"At the outset, I know that these changes will be tough for many employees," said the CEO, although he stressed that Sun will emerge as a "leaner," more focused company. "The industry is littered with companies that try to be all things to all people, and that's not Sun."

Although he did not go into specifics, Schwartz said that Sun, which stumped up $4.1 billion for StorageTek last year, will be simplifying its product lines and that all products will now be built at Sun. (See Sun to Acquire StorageTek for $4.1B and 2005 Top Ten: M&A.)Perhaps responding to user calls for more information on plans to integrate StorageTek technology with its own core offerings, Schwartz pointed to the recently launched T10000 tape library as evidence of Sun's ability to tie its product lines together. (See Sun Launches Tape Libraries and Sun Fills in Storage Crypto Details.) "As a part of Sun, we were able to leverage our security to add encryption," he said.

In the future, Schwartz promised that StorageTek systems will be "built atop Sun servers running Solaris," while maintaining their mainframe heritage. This month, he added, will also see the debut of a new 2U two-way Sun Fire server, code-named "Thumper," with a 24-Tbyte capacity.

At this stage, Schwartz is unable reveal what impact the job cuts will have on Sun's storage workforce. It's going to be tough working out the specific effects on the StorageTek and traditional Sun divisions, he explained when quizzed by an analyst on last night's call. The CEO, however, promised that core product roadmaps will not be affected.

On the storage side, Sun has already promoted David Yen, the former executive vice president of Sun's scalable systems group to executive VP of the vendor's storage group, a move that has prompted a mixed reaction from users. (See Advice for Sun and Sun Takes Action Amidst Concerns.)

Nonetheless, there is a lingering concern that in the aftermath of last year's StorageTek deal Sun has not done a great job explaining its storage strategy. (See Sun Closes on StorageTek .) And the vendor has been steadily losing ground to vendors such as EMC, IBM, Hewlett-Packard, and Network Appliance, while the firm's recent quarterly product launch contained just a handful of storage announcements. (See Sun Sets on StorageTek and Sun Unveils Services.)There are specific gaps that need to be plugged. Despite user demands, Sun has yet to launch VSM Open, a tape management product for open systems that was already late when the StorageTek acquisition took place. (See StorageTek Users Voice Support Fears.)

Recent events have also conspired to increase the pressure on the company. Last month, for example, two of the vendor's main rivals in the tape drive space joined forces to double their market share. (See Quantum Takes Tape Rival ADIC.)

Last night's restructuring is part of the firm's strategy to achieve operating incomes of at least four percent of revenues for the fourth quarter of fiscal year 2007. Long-term, Sun hopes to push this figure to 10 percent.

In late trading last night, Sun shares rose 3 cents (0.65 percent) to $4.66.

James Rogers, Senior Editor, Byte and SwitchOrganizations mentioned in this article: