October 21, 2009 12:11 am

Sun blames Brussels as 3,000 jobs are axed

Sun Microsystems on Tuesday announced plans to slash 3,000 jobs over the next year, putting the move down to the delay in getting European Commission clearance for its agreed $7bn acquisition by Oracle.

The latest in a string of job cuts from the struggling US maker of servers and other equipment for corporate data centres followed recent complaints from Oracle that the review in Brussels was hurting Sun’s business.

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Larry Ellison, Oracle’s chief executive officer, said last month that Sun was losing $100m a month as it awaited regulatory approval for the deal.

That is twice the rate of losses Sun was suffering in the latest quarter for which it reported earnings.

In a filing with the Securities and Exchange Commission, Sun failed to provide any update about its finances, but said its board had decided on the job cuts “in light of the delay in the closing of the acquisition of the company”. The cuts account for about 10 per cent of its workforce.

However, it failed to say whether the regulatory delay – by causing uncertainty among its customers – was directly to blame for the job losses, or whether cuts were likely to have been made later anyway following an Oracle acquisition.

There had already been signs that Sun’s customers had delayed purchases of new equipment as they waited for the completion of the deal and a clearer sense of whether the software company would continue to develop Sun’s existing range of products.

Sun blamed a 31 per cent collapse in its revenues in the three months to the end of June partly on customer caution prompted by the acquisition, although its results were also badly dented by the slumping economy.

A series of retrenchment actions have now seen Sun embark on 10 restructuring efforts, as it tried to deal first with declining competitiveness caused by changes in its markets, and more recently by the recession.

It announced cuts of 5,000-6,000 jobs a year ago.

Mr Ellison has also been expected to make deep cuts to pare Sun’s losses to hit his financial targets from the Oracle deal.

In Silicon Valley, where both companies are based, Oracle’s agreement to buy Sun was seen as preferable to a possible purchase by East Coast-based IBM . However, one person close to the deal warned that the Oracle purchase would probably lead to far bigger job losses than would have occurred under IBM.

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