Sun Layoffs to Happen This Week
It's a tough time to be selling servers at Sun.
The news of Sun layoffs had been known as far back as November of last year (as part of a 6,000 employee reduction in staffing), but it appears that the company is now confirming the pink slips of 1,500 workers for this week. In January, Sun let go 1,300 workers. The jobs appear to be mostly on the sales side, with a good portion of sales moving to a more indirect model. Here's some more info from the IDG news article:
Sun said the layoffs affect staff at all levels, including vice presidents and directors.
"Sun continues to make important choices to streamline operations and align resources to best address market opportunity and position the company for improved financial performance and long-term growth," it said in a statement via e-mail.
These latest cuts would have been planned before any acquisition talks with IBM got under way, said Dan Olds, principal analyst at Gabriel Consulting, who also heard that Sun sales staff are among those affected. Sun is reportedly in talks to be acquired by IBM, though neither company has confirmed any discussions. IBM is said to be examining Sun's contracts and other documents to see if a deal makes sense.
A Sun executive said last summer that the company planned to move its North American business to an indirect sales model for all but its largest customers, so a move to reduce its sales team this week would not be a surprise.
"Effectively we're going to go 100 percent 'channel' below the top 300 or so accounts," Tom Wagner, vice president of Sun's North America partner sales organization, told IDG News Service at the time.
While rumors of a potential deal between IBM and Sun has been ongoing for several weeks, nothing has really happened publicly to date, except for layoffs for both. IBM laid off nearly 5,000 workers across the company, with much of the work being given to IBM employees outside the U.S., much of it in India.
Heidi N. Moore of the WSJ postulates that it's not surprising to see the two companies waiting it out and working behind the scenes, while Sun's stock price is taking a hit. IBM's remains relatively close to what it was during the first news of a deal being worked. Is it due diligence or waiting for the price to drop so IBM doesn't look like it's overpaying while it cuts 10,000 U.S. jobs?
The most interesting bit of the Sun layoffs comes from a research note from financial analyst company Wedge Partners (which told IDG) that suggests that sales performance "has been particularly ineffective in the current quarter."
Well, I guess when you tell sales people you are going to can them and replace with the channel coupled with the news that the company could be gearing up to be sold to IBM, there is little room for incentive. Hard to do business when the guys you've been running into at client meetings for years may be positioned to replace you.