IT giants offer diverse strategies

Sun announces restructuring plan, CA announces losses, MS to increase R& D spend

Sun Microsystems has began a restructuring effort as other IT giants revealed plans to improve their fortunes.

Sun announced that it would lay off up to 5,000 staff over the next six months as it repositions itself for a new era after Scott McNealy’s recent departure from the chief executive’s seat.

McNealy had been roundly criticised for failing to reduce staffing. The appointment of Jonathan Schwartz as his replacement and the return of Michael Lehman as chief financial officer meant redundancies were inevitable.

The headcount reduction programme will see up to 13 percent of staff leave as part of a broad series of cost-cutting measures, including property sales.

This initiative and recent changes in executive posts means Sun is now positioned for growth but must move away from non-core research and development and towards more cross-fertilisation of its technologies, Schwartz said.

The vendor announced that it would focus on growth opportunities, including Java, Solaris, SunFire and StorageTek platforms. The firm will also take advantage of economies of scale by developing future StorageTek and other storage servers on its own SunFire server platform and building in its Java Enterprise software stack.

In June, for example, Sun plans to announce a new storage appliance, codenamed “Thumper”, in “a miniature package” that will boast up to 24TB of storage capacity.

“Our industry is littered with companies that try to be all things to all people,” Schwartz said in a webcast. “That’s not Sun.”

Schwartz added that the firm would focus on customers “that see network computing as a vital element of their strategy, those pushing the limits of scale and load, and those that see IT innovation as anything but a cost centre”.

Meanwhile, enterprise software giant CA last week brought back memories of its recent financial problems by saying it would swing into a quarterly loss, restate earnings and delay filing results.

CA said it had discovered problems relating to sales commissions, forcing the request for a delay.

The problems follow the recent departure of board members, including the firm’s finance chief. The news will remind some of previous accounting problems that led to former chief executive Sanjay Kumar pleading guilty to fraud, and also led to a change of name from Computer Associates to the current abbreviated form.

Understandably, the return of accounting problems is leading to discord among investors and creating doubts about the tenure of John Swainson, the former IBM executive who took over as chief executive of CA only last year.

Elsewhere, Microsoft chief executive Steve Ballmer was last week attempting to justify his company’s plans to sharply increase its spending on research and development.

“I know some investors will say, well, [this investment strategy is] wrong,” Ballmer told an audience of analysts. “I think that it’s absolutely right. If you believe in the opportunity we believe in, you’ve got to invest behind it. You’ve got to be optimistic about your ability to change the world. You’ve got to make big, bold bets.”

Ballmer also fuelled rumours that Microsoft could make a major purchase of eBay or Yahoo by saying: “People ask me, are you going to mostly build or buy? I say both.”