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Sun's restructuring leaves questions about direction

Sun's restructuring leaves questions about direction

The restructuring at Sun Microsystems announced Wednesday, in which the company said it will "simplify" product lines, eliminate redundant research and development and cut its workforce by as much as 13 percent, has left a lot of unanswered questions, especially about how these changes will affect Sun's customers.

"There was very, very scant information provided yesterday that would allow us to go through an analysis of what the effect is going to be on Sun's products," said Paul McGuckin, an analyst at Gartner who covers Sun.

Sun's new CEO, Jonathan Schwartz, told financial analysts in a conference call yesterday that the changes he is seeking will have little customer impact but will enable the company to focus on network computing and technologies to support it.

But Schwartz didn't provide the details about how that will be achieved, and company officials weren't adding any Thursday. When asked which product lines would be affected, the written response from a Sun spokeswoman was that "the company has not identified products or projects that will be affected at this time." The answer was similar for its impact on R&D.

That response has left analysts largely speculating.

For instance, Schwartz, in illustrating the direction he intends to take the company, cited several newer products as key to its future direction, such as its eight-core UltraSparc Niagara processor and the forthcoming "Thumper," an Opteron-based server that integrates with storage. But in regard to Thumper, McGuckin said that if he were a customer of Sun's proprietary RAID controller, he would have concerns.

McGuckin said that Schwartz's citing of Thumper as an example of Sun's future "calls into question the fate of some of Sun's other storage products, which are based upon what Sun would call proprietary technology." Those proprietary storage technologies "are going to get more scrutiny and perhaps cut," he added.

"What we're telling clients is any road map dependencies that they have -- they are going to need to get written commitments from Sun," McGuckin said.

Simplifying hardware products may lead to development of servers built around similar architectures, said Richard Partridge, an analyst at Ideas International in Port Chester, N.Y. For instance, an UltraSparc server and an Opteron-based server could get the same design team, and customers may see improved pricing because of it. "As part of this product rationalization, you may find some design teams that are surplused," he said.

While Sun says customers won't feel any impact from the cuts, analysts don't see how Sun can cut 4,000 to 5,000 employees from its 37,500 employee base without it having some impact.

"Customers can expect some consolidation in their sales force, and they are going to find it harder and harder to get a specialist," said Susan Aldrich, an analyst at Patricia Seybold Group in Boston.

Sun posted a loss of US$217 million in its most recent fiscal quarter, but it hopes that its workforce reductions and its office consolidations will yield annual savings of up to US$590 million.


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