Sun Plots Reorg, Releases Chips

Sun's in upheaval, planning yet more job cuts and restructuring, as well as a foray into the merchant silicon market. (See Sun Enters Silicon Market, Sun Reshuffles Storage... Again, and Storage Slows Down Sun.)

In an SEC filing this week, Sun revealed that its board has approved a "Restructuring Plan" that will involve workforce reductions "in various geographies." Although Sun has not revealed the scale of these job cuts, the SEC document says the firm will incur costs of between $100 and $150 million "over the next several quarters" as a result of its restructuring efforts.

Most of the cash impact of Sun's restructuring effort will come from severance costs, the bulk of which will be incurred in the first half of 2008, according to the filing.

The news is no surprise. Sun's recent fourth-quarter results painted a less-than-rosy picture of its server and storage business, with revenues down 10.4 percent year over year. (See Storage Shades Sun's Q4 and Sun Exceeds Profit Target.)

Pund-IT analyst Charles King believes the ongoing restructuring underlines the troublesome nature of Sun's storage business, even two years after its $4.1 billion StorageTek acquisition. (See Sun Closes on StorageTek .) "Storage has always been a problematic spot for Sun, really for several years now," he says, explaining that the vendor started to ramp up its storage hardware efforts at a time when rivals IBM and EMC were focusing on storage services and software. "A commodity business of any sort is a tough place to make a killing."