Sun Shuffles Executives after Third-Quarter Loss

UPDATED: Sun executives weigh in on the company's direction as it reports a loss of $760 million for the third quarter and announces a sweeping corporate reorganization of its business units with an eye on cost

Sun Microsystems Inc. on Thursday announced a sweeping corporate reorganization of its business units in reporting a loss for its fiscal third quarter.

Sun, based in Santa Clara, Calif., said it would rearrange its business units to better manage its cost structures and "drive efficiencies," a common refrain at most technology companies. But two key executives have left the company, and a third remains in limbo pending his own evaluation of his role at Sun, executives said.

In other news, Sun said it has formally completed its acquisition of Kealia Inc.

Sun reported a loss of $760 million for the third quarter on revenues of $2.65 billion, a year-over-year revenue decline of 5.0 percent from a year ago, when the company reported a slight $5 million profit. The loss includes charges of $500 million for the restructuring, a change in tax valuation allowance and a slight $3 million gain on investments.

Sun said April 2 that it would report a loss between $750 million and $810 million on revenues of about $2.65 billion, while also naming Jonathan Schwartz, formerly Suns software chief, to his new post as president and chief operating officer.

In his new position, Schwartz said Thursday that he would consolidate Suns microprocessors, enterprise systems and SPARC-based volume systems initiatives. They will be unified under the Throughput Systems group, led by executive vice president David W. Yen, who is responsible for driving Suns Throughput Computing and Throughput Networking initiatives.

Last week, Sun said it would cancel the "Millennium" and "Gemini" cores, which was interpreted as a cancellation of the UltraSPARC V line.

/zimages/3/28571.gifSun says its UltraSPARC line is not dead yet. Click here to read more.

Systems using processors from Intel and AMD will be combined under the Network Systems group and will be led by John Fowler, who will hold dual roles as Network Systems acting executive vice president and as lead technology officer for Schwartz.

The Network Systems organization will "focus on delivering low-cost, horizontally scaled systems with off-the-shelf components that leverage industry economics," Sun said. Both Yen and Fowler will report to Schwartz.

/zimages/3/28571.gifClick here to read an interview with Schwartz about Suns settlement with Microsoft.

Mark Tolliver, chief marketing and strategy officer, and Neil Knox, executive vice president of volume systems products, have left the company after the restructuring. Clark Masters, executive vice president of systems products, is in limbo pending his own evaluation of his role within Sun, executives said.

In their stead, Sun named Anil Gadre, 47, as interim chief marketing officer; and Brian Sutphin, 49, as vice president of corporate development. Both will report to Schwartz.

Next Page: Improving Suns cost structure is a priority, McNealy says.