Jean Bozman, an analyst at market research firm IDC, said that Schwartz has intended for Sun to be the category leader in open source for enterprise users. Sun officials hope to make money off of open-source technologies through technical support contracts and by selling hardware to users, Bozman said. But, she added, "clearly they weren't feeling that they were getting the maximum leverage they could" from the open-source products.
One of the risks for Sun is how the job cuts will affect its financial performance and its ability to service customers. The company had 34,900 employees as of the end of its last fiscal year in June. The new layoffs will eliminate between 5,000 and 6,000 workers over the next 12 months; combined with earlier cutbacks, that will leave Sun with 27,000 to 28,000 employees, for a head count reduction of as much as 21 percent since mid-2007.
Sun hopes that the layoffs will save up to US$800 million in expenses annually. But when a company cuts this many people, "if it's not done properly, the effects on the company could be deleterious -- awful," King said.
Stepping back, though, Sun still has deep resources. It has US$3 billion in cash on hand, and its revenue for the fiscal year that ended last June amounted to nearly US$14 billion. And although the company is seeing a slowdown in sales of its high-end enterprise servers, its line of chip multithreading systems, based on the UltraSparc T2 processor, has been selling well.