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Sun may yet set on local workforce

Sun may yet set on local workforce

Employees of Sun Microsystems in Australia and New Zealand face an anxious wait to learn if they will number among the 5000 to 6000 workers the subsidiary's US parent plans to put out to pasture under a sweeping cost-cutting drive.

Sun, once one of the world's dominant makers of high-end servers, employs about 650 people in Australia and as many as 120 positions

there could be under threat after the multinational announced late last

week it would lay off up to 18 per cent of its workforce.

The redundancies are a response to plummeting equipment sales that

have followed Wall Street's mid-September meltdown.

In Australia, Sun Microsystems is yet to learn how the cost-cutting

push will play out, but local managing director Duncan Bennet said

that the subsidiary was yet to witness an abrupt change to corporate

spending here.

"We've got people head down doing business and there is still business

being done," Mr Bennet said. "IT is not a discretionary cost for a lot

of companies so big IT projects are going to continue."

Australian companies such as Qantas and Suncorp have confirmed they

are reprioritising computing projects and reducing their use of

information technology contractors in response to the worsening

economic environment.

However, a number of vendors that compete locally and overseas,

including Sun, SAP and Mincom, have said they haven't seen in

Australia the abrupt softening of business that has triggered a host

of earnings downgrades in the US.

Mr Bennet said issues such as excess inventory that had hurt IT

vendors badly in the dotcom bust weren't as prevalent today.

"Certainly we don't have any inventory exposures here, none at all. In

fact the supply chains at Sun . . . have come a long way and become

very, very efficient."

Mr Bennet's comments came as Sun filed its financial accounts for the

year to June 30 with the Australian Securities and Investments

Commission.

The company reported a sharp rise in net income from $1.6 million a

year ago to $18.6 million as it cut costs and booked a $6.9 million

gain on the integration of its operations with those of acquisition

StorageTek Australia and New Zealand.

Mr Bennet said revenue dropped from $567.8 million a year ago to

$462.1 million as the benefits of a large, one-off order linked to

Telstra's information technology transformation faded. Sun's local

revenue in the year to June 30, 2006 was $392.2 million.

"We're delighted with the results. We made our internal revenue goal

and we made our internal profit goal," he said.

"There were some efficiencies in depreciation, we used fewer contract

resources, administration and consulting fees were down $4 million . .

. and if you look at the salary costs they were almost flat year on

year."

Mr Bennet declined to discuss the company's growth expectations for

its 2009 financial year.

But he said Sun would look to its portfolio of low-cost, open-source

software products to spur sales to cost-conscious customers.

Australian Financial Review, Fairfax Business Media

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