Sun To Cut 3,000 Jobs As EU Delays Oracle Deal - Update
(RTTNews) - Computer server and software maker Sun Microsystems Inc. (JAVA | Quote | Chart | News | PowerRating), Tuesday said it would slash up to 3,000 employees over the next year, as the proposed $7.4 billion takeover deal with business software maker Oracle Corp. (ORCL | Quote | Chart | News | PowerRating) gets delayed.
In a regulatory filing, Sun disclosed that it has approved a plan to better align its resources with its strategic business objectives, including reducing its workforce across by up to 3,000 employees over the next 12 months.
The job cuts will be effected in North America, EMEA, APAC and Emerging Markets regions, the Santa Clara, California-based company said.
Sun said it expects to incur total charges in the range of $75 million to $125 million over the next several quarters in connection with the restructuring plan, the majority of which relates to cash severance costs and is expected to be incurred in the second and third quarters of the fiscal year ending June 30, 2010.
Sun, known for its UltraSPARC processor-based servers, Solaris operating system and Java technology, is relying heavily on the takeover deal by Oracle. The proposed Oracle-Sun deal is seen as a move that would take Sun out of its miseries.
Sun has never fully recovered from the dotcom bubble burst in the early 2000s, when demand for its servers cratered. After 2001, Sun reported losses for many straight quarters and its much-hyped vision - Network is the Computer- also failed to takeoff as expected.
In 2006, Sun's long-time chief executive officer Scott McNealy stepped down from the post and appointed Jonathan Schwartz as new CEO. This too did not solve Sun's problems and in early 2009, was reported to have had talks with IBM for a possible acquisition.
Subsequently in April, Oracle agreed to acquire Sun for $9.50 per share in cash deal aggregating about $7.4 billion, or $5.6 billion, net of Sun's cash and debt.
Sun Microsystems was an easy target for acquisition as it has been struggling financially in recent times. The Silicon Valley company has long been a source of technological innovation. Despite its innovations in software, Sun has been unable to arrest the erosion in the profitability of its mainstay server business.
Redwood City, California-based Oracle is said to have been lured by the substantial long-term strategic customer advantages owning two key Sun software assets: Java and Solaris.
Oracle and Sun have been industry pioneers and close partners for more than twenty years. Oracle has already been using Solaris as the platform for its database products. Oracle can now optimize its database for some of the unique, high-end features of Solaris.
In October, the Oracle-Sun deal went through the U.S. anti-trust review smoothly. However, the deal is now facing a tough time with the European regulators. Owing to concerns regarding competition, the European Commission has opened an in-depth investigation under the EU Merger Regulation into the deal.
The European Commission now has time until January 19, 2010 to take a final decision on whether the concentration would significantly impede effective competition within the European Economic Area or a substantial part of it.
The three main competitors of proprietary databases - Oracle, IBM and Microsoft - control about 85% of the database market in terms of revenue. Oracle is the market leader in proprietary databases, while Sun's MySQL database product is the leading open source database.
The Commission's preliminary market investigation revealed that the Oracle databases and Sun's MySQL compete directly in many sectors of the database market and that MySQL is widely expected to represent a greater competitive constraint as it becomes increasingly functional. The Commission's investigation also showed that the open source nature of MySQL might not eliminate fully the potential for anti-competitive effects.
In its in-depth investigation, the Commission will address a number of issues, including Oracle's incentive to further develop MySQL as an open source database.
Sun closed Tuesday's regular trading session at $9.01, down 10 cents or 1.10% on a volume of 9.45 million shares. In the after-hours, the shares gained 1 cent.
For comments and feedback: contact editorial@rttnews.com
Copyright(c) 2009 RTTNews.com, Inc. All Rights Reserved
In a regulatory filing, Sun disclosed that it has approved a plan to better align its resources with its strategic business objectives, including reducing its workforce across by up to 3,000 employees over the next 12 months.
The job cuts will be effected in North America, EMEA, APAC and Emerging Markets regions, the Santa Clara, California-based company said.
Sun said it expects to incur total charges in the range of $75 million to $125 million over the next several quarters in connection with the restructuring plan, the majority of which relates to cash severance costs and is expected to be incurred in the second and third quarters of the fiscal year ending June 30, 2010.
Sun, known for its UltraSPARC processor-based servers, Solaris operating system and Java technology, is relying heavily on the takeover deal by Oracle. The proposed Oracle-Sun deal is seen as a move that would take Sun out of its miseries.
Sun has never fully recovered from the dotcom bubble burst in the early 2000s, when demand for its servers cratered. After 2001, Sun reported losses for many straight quarters and its much-hyped vision - Network is the Computer- also failed to takeoff as expected.
In 2006, Sun's long-time chief executive officer Scott McNealy stepped down from the post and appointed Jonathan Schwartz as new CEO. This too did not solve Sun's problems and in early 2009, was reported to have had talks with IBM for a possible acquisition.
Subsequently in April, Oracle agreed to acquire Sun for $9.50 per share in cash deal aggregating about $7.4 billion, or $5.6 billion, net of Sun's cash and debt.
Sun Microsystems was an easy target for acquisition as it has been struggling financially in recent times. The Silicon Valley company has long been a source of technological innovation. Despite its innovations in software, Sun has been unable to arrest the erosion in the profitability of its mainstay server business.
Redwood City, California-based Oracle is said to have been lured by the substantial long-term strategic customer advantages owning two key Sun software assets: Java and Solaris.
Oracle and Sun have been industry pioneers and close partners for more than twenty years. Oracle has already been using Solaris as the platform for its database products. Oracle can now optimize its database for some of the unique, high-end features of Solaris.
In October, the Oracle-Sun deal went through the U.S. anti-trust review smoothly. However, the deal is now facing a tough time with the European regulators. Owing to concerns regarding competition, the European Commission has opened an in-depth investigation under the EU Merger Regulation into the deal.
The European Commission now has time until January 19, 2010 to take a final decision on whether the concentration would significantly impede effective competition within the European Economic Area or a substantial part of it.
The three main competitors of proprietary databases - Oracle, IBM and Microsoft - control about 85% of the database market in terms of revenue. Oracle is the market leader in proprietary databases, while Sun's MySQL database product is the leading open source database.
The Commission's preliminary market investigation revealed that the Oracle databases and Sun's MySQL compete directly in many sectors of the database market and that MySQL is widely expected to represent a greater competitive constraint as it becomes increasingly functional. The Commission's investigation also showed that the open source nature of MySQL might not eliminate fully the potential for anti-competitive effects.
In its in-depth investigation, the Commission will address a number of issues, including Oracle's incentive to further develop MySQL as an open source database.
Sun closed Tuesday's regular trading session at $9.01, down 10 cents or 1.10% on a volume of 9.45 million shares. In the after-hours, the shares gained 1 cent.
For comments and feedback: contact editorial@rttnews.com
Copyright(c) 2009 RTTNews.com, Inc. All Rights Reserved
For full details on Sun Microsystems Inc (JAVA) JAVA. Sun Microsystems Inc (JAVA) has Short Term PowerRatings at TradingMarkets. Details on Sun Microsystems Inc (JAVA) Short Term PowerRatings is available at This Link.
For full details on Oracle Corporation (ORCL) ORCL. Oracle Corporation (ORCL) has Short Term PowerRatings at TradingMarkets. Details on Oracle Corporation (ORCL) Short Term PowerRatings is available at This Link.
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