Did Oracle CEO and co-founder Larry Ellison underestimate how many of Sun Microsystems' 27,600 employees might lose their jobs in the acquisition of Sun concluded in January?
Oracle filed an 8-K affidavit with the federal Securities and Exchange Commission late June 4 stating that it needs to spend more money and take a much larger charge that it originally expected for severance expenses and other staff-related costs in the $7.4 billion acquisition that closed Jan. 27.
A plan submitted to the SEC in January following the close of the acquisition projected restructuring costs of $325 million that would affect about 1,000 employees. According to the June 4 filing, Oracle management has now decided to expand the restructuring plan to somewhere between $675 million and $825 million-more than doubling the original figure.
The added charge could indicate that Oracle is planning to lay off two or three times as many people as originally expected, and perhaps more.
In the SEC notification, Oracle did not reveal how many layoffs these restructuring costs would entail. Oracle spokesperson Karen Tillman told eWEEK that the company would have no comment beyond the 8-K filing.
"Oracle expects that $550 million to $650 million of these additional costs will be restructuring charges related principally to employee severance costs, $85 million to $115 million will relate to facilities costs, and $40 million to $60 million will relate to contract termination costs," Oracle wrote in the June 4 SEC filing.
Oracle was mandated to make this disclosure because May 31 is the end of the company's fiscal year; any ensuing costs related to the acquisition will come out of its calendar 2011 budget. Notifications to laid-off employees, mostly in Europe and Asia, were mailed beginning May 28, the filing said.
Although Oracle took an expected financial hit in its first quarterly report after closing the acquisition, the world's third-largest software company nonetheless reported good financial results, recording a profit of $1.19 billion, or 23 cents per share, for the final quarter of calendar 2009.
On that day, Oracle Chief Financial Officer Jeff Epstein said the acquisition had added $458 million in revenue to the company's fiscal third quarter but restructuring and operating costs took a heavy toll on the bottom line.
"The Sun integration is going even better than we expected," Oracle President Safra Catz said during the conference call. "We believe that Sun will make a significant contribution to our fourth-quarter earnings per share as well as meet the profitability goals we set for next year."
At the news conference concerning the acquisition back on Jan. 27, Ellison was quite specific in pledging that Oracle would hire about 2,000 new people for various departments-twice as many as the company would be letting go due to duplicative functions, such as in human resources, financial services and marketing.
In fact, buttons proclaiming "We're Hiring" were distributed at the event.
At the event, Ellison scolded analysts and journalists who had predicted heavy layoffs resulting from the deal.
On a Jan. 13 advisory to clients by UBS tech analyst Brent Thill saying Oracle would likely lay off about half of Sun's 27,600 employees, Ellison said, "Some very bad stories in the press recently reported that we were going to do a massive layoff after the acquisition.
"That story is completely false. We are not planning such layoffs. Those who wrote this should be ashamed of themselves. Sun went through enough angst without having to deal with this. The truth is, we are going to hire about 2,000 new people to beef up the Sun businesses-about twice as many as we will let go," Ellison said.