Sun announces next wave of layoffs 6 April, 2009 By Chris Talbot

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Reports from The Wall Street Journal suggest the talks haven't been going well and that the entire acquisition bid may be falling apart, while others have said that Sun may best be served by going a completely different route. According to Michelle Warren, president of MW Research & Consulting, it appears that what Sun is doing with its layoffs (1,300 people were given notice in January, and another 1,500 just received notification they were being laid off), is cleaning house.

"If they're laying people off, then it's probably more than just a rumor," Warren said about the speculated acquisition of Sun by IBM.

As discussions continue with IBM, it's important that Sun makes itself appear as attractive as possible, she said. Additionally, if IBM does actually purchase Sun, there's a certain logic to making the cuts before IBM takes over and makes the cuts itself.

According to other reports, Sun is shifting its focus to its channel go-to-market model, placing less emphasis on direct sales, in light of the layoffs. A statement released to the press by Sun stated, "Sun continues to make important choices to streamline operations and align resources to best address market opportunity and position the company for improved financial performance and long term growth. In November 2008, Sun announced a series of changes designed to align its cost model with the global economy and accelerate the introduction of compelling open source innovations."

Sun confirmed the layoffs, but not the channel restructuring. If Sun is placing more focus on its indirect channel sales, though, it's an opportunity to build stronger relationships with its partners, Warren said.

While a completed acquisition would likely mean changes in time, it wouldn't affect Sun right away. However, if Sun is looking to improve its book value, this is a win-win situation, Warren said. It's good for Sun and it's good for its channel partners in the long run. If Sun has cut salespeople (and according to the company, cuts have been made at all levels, that means the company will have to rely more on its channel partners.

Although the cuts aren't a good thing for Sun's employees, it could be a good thing for the vendor's channel, Warren said. It is entirely possible some of those employees could find work within the Sun channel, though, she said.

"Even if this deal has fallen through -- this speculated deal, of course -- it probably still has to improve their operational efficiencies," she said.

Even if IBM doesn't buy Sun, the partner community will benefit from the changes, she added.

GigaOM staff writer Om Malik suggested an alternative plan for Sun -- that is, to "pursue an option of going private."

Warren called the idea an interesting solution and noted it would be a way for the vendor to avoid public scrutiny and focus more on its technologies and improving its go-to-market strategies.

"That just might be the answer for them," she said.