The global slowdown is beginning to take its toll on more exposed hardware and consulting companies. On Friday, July 10, Sun began sending out pink slips to more than 1000 employees, primarily in the marketing and sales areas as part of a broader move to reduce costs in the face of a third quarter loss of $34 million dollars announced in May. An additional 2500 job cuts are rumored to be in the works as well for the beleaguered server company.
In an perhaps not unrelated note, analyst Ashlee Vance with the Register speculates that Sun may be a takeover candidate for Japanese consulting giant Fujitsu. In the last decade Sun has fallen from a $50B+ company to its current level of $7B, which drops it out of the category of being a large-cap stock and has some serious implications for its listings on the Dow indexes.
Fujitsu, on the other hand, has long been a strong Sun customer, and at a market share of $16B, it's solid enough that a merger of the two companies would be effective both on Wall Street and in the IT shops, especially as Sun's presence in Asia is fairly weak while Fujitsu's North American operations have also been anemic.
Unfortunately for the company, unless such a takeover occurs, Sun's going to be facing increasing headwinds in what is turning into a fairly severe global economic storm. IT budgets at larger companies and organizations are beginning to be pared back, though not as dramatically as during the 2001-2004 tech bust.
In this light its acquisition of mySQL late last year begins to look more questionable - while it is likely that mySQL usage will likely continue to climb due to the same economic factors, the question of whether the consulting arm of mySQL AB (which is in essence the value of the purchase) will manage to yield enough revenues to even begin offsetting the $1B cost of the open source database company.
Sun has long been somewhat of an iconoclastic company - hiring many of the brightest and most well-known minds in the industry, including a number of people who have been critical in the open source and open standards movement. In recent years the company has been targeting the open source community with its products, opening up Solaris, Java and Star Office (Open Office) in the process.
However, while Sun has been one of the industry leaders in this space, its ability to monetize its products and services in this sector hasn't been as strong, either from a shift to consulting services or through hardware sales; as software commoditization and hardware virtualization continue to remake the IT sector, Sun may indeed be slipping below the horizon.
Kurt Cagle is online editor for O'Reilly News and an author and information architect living in Victoria, British Columbia, where we've finally managed to exchange parkas for swimsuits.