Oracle to chop 10,000 jobs after buying Sun
The new religion - fire everyone.
By Robert McMillan, IDG News Service | Published: 09:49, 21 April 2009
As many as 10,000 people could lose their jobs as the result of Oracle's surprise $7.4 billion acquisition of Silicon Valley icon Sun, a financial analyst has predicted.
Excluding charges related to the restructuring, Oracle expects the Sun deal to contribute $1.5 billion (£1 billion) toward its earnings next year and $2 billion in the second year of the acquisition, making it "more profitable in per-share contribution in the first year than we had planned for the acquisitions of BEA, PeopleSoft and Siebel combined," Oracle President Safra Catz said in a statement on Monday.
That profitability will come via layoffs, according to Tony Sacconaghi, a well-respected technology analyst with Sanford C. Bernstein & Co. He had been forecasting $800 million in operating profit for Sun's fiscal 2010, rather than the $1.5 billion predicted by Oracle.
"In order to deliver $1.5B in op. profit, [Oracle] would need to boost profits by $700 million assuming no material revenue erosion, which suggests incremental headcount reductions of 5,500 to 10,000 depending on timing," Sacconaghi wrote in a research note released soon after the deal was announced. Oracle declined to comment on any possible layoffs.
The acquisition was announced Monday, just two weeks after Sun's previous suitor, IBM, had walked away from the table after being unable to come to acquisition terms.
Analyst firm Technology Business Research (TBR) agreed that layoffs are coming, predicting that sales and marketing staff will be hit hardest. "Oracle will rapidly rationalise Sun's cost-base," the company said in a report on the deal. "This means general layoffs and a reshaping of cost centers such as services and support."
Jobs may also be shuffled about from country to country as Oracle reshapes Sun's support and services group to match its global model, the TBR report said.
Sun, which has struggled for the better part of the past decade, following the dot com implosion, is already in the process of slashing between 15 percent to 18 percent of its workforce, or as many as 6,000 employees.
