Sun Layoffs Late But Needed, VARs Say
Sun Microsystems' plan to lay off up to 18 percent of its workforce is better late than never, according to the company's solution providers. Sun on Friday said it plans to lay off between 5,000 and 6,000 employees, or up to 18 percent of its workforce, in an effort to reduce annual costs by $700 million to $800 million.
Sun's channel partners called the move a big opportunity for them, but wished the company would have made such a big cut years ago instead of the tiny cuts that kept Sun's employees on edge for fear of losing their jobs at any time.
The move was nine years too late, said one solution provider, who requested anonymity.
"It's not enough, but it's a move in the right direction," the solution provider said. "They have to get leaner and meaner."
The solution provider praised Sun for moving in the right direction, but cautioned the vendor that it should not stop now.
"They should be very vigilant, and should be prepared for the next phase," the solution provider said. "This shows that Sun is finally out of the denial phase."
As such, it is a huge benefit for the channel, the solution provider said. "If Sun is getting rid of up to 18 percent of its workforce, it leaves them more dependent on the channel than ever before."
Sun announcement that it plans to lay off up to 6,000 employees only adds to the uncertainty the company's employees face, said John Murphy, executive vice president of Advanced Systems Group, a Denver-based solution provider and Sun partner.
"Instead of saying 'Sun to lay off up to 6,000 people,' they should have said, 'Sun laid off 6,000 people,'" Murphy said. "That's a lot of uncertainty. They should have waited until Monday and handed them a package and a pink slip. They should just get it over with."
Murphy said that, while it is admirable for Sun to try to keep its employees, the company still has to manage its business.
"A company's got to be profitable," he said. "You have to convince your customers that you are an on-going, viable business with your ducks in a row. We've been telling Sun that for a long time."
The layoff will bring new opportunities to Sun's channel partners, Murphy said.
"Sun all of a sudden has to do more with less," he said. "And we are an expensive, high-overhead sales organization that doesn't cost Sun a dime. If I were Sun, and were laying people off, I'd be trying to get them hired by their partners."
Andrew Kotarba, president and CEO of Dewpoint, a Lansing, Mich.-based solution provider and Sun partner, said that while he hates to see 6,000 people lose their jobs, the Sun partner community agrees it needs to be done.
"You have a company that still has a healthy revenue run rate," Kotarba said. "It needs to get profitable. It gets the pressure off their back from the earnings report."
Kotarba, too, sees a big opportunity for the channel in the layoffs. "Sun placed bets on its channel partners to go to market for them," he said. "With the cuts, they will depend on us more. Dewpoint is heavily invested in Sun. This is an opportunity for us to do more."
Whether the cuts are enough remains to be seen, however. "Sun said it will save $700 million to $800 million annually," Kotarba said. "If there are no other serious downturns, it should be enough. We all go through this as business owners. We need revenue to be higher than expenses."
Kotarba said a lot of the questions about Sun's viability are actually started by competitors, but that Sun's balance sheet and technology show it to be a very viable company.
"Sun's technology is second to none," he said. "Some customers ask about it, some don't. We don't have that discussion with Sun's installed base of customers. They know Sun and its technology. But when trying to displace Dell or HP or IBM, you need firepower. With all the noise in the marketplace, it's hard. We need the merits of the technology to stand on their own."
All three solution providers cited as an example of Sun's technology its new "Amber Road" storage architecture which combines its server and software technology with off-the-shelf components in a high-performance, low-power consumption offering.
"Amber Road" is how Sun refers to its new Storage 7000 Unified Storage Systems, part of Sun's Open Storage platform under which it aims to help customers build high-performance storage products using commodity components.
Amber Road will hit some price points that will get attention, Murphy said.
"It has the potential to open new business in traditional non-Sun storage accounts," he said. "If Sun comes out with a good demo unit program that gets it in the hands of the right people, it could do well."