Earlier this week, UBS AG analyst Brent Thill predicted in a report, according to Bloomburg news, that Oracle would need to fire about half of Sun’s staff in order to turn a profit from the former enterprise IT giant.
The $US7.4-billion deal has been in limbo for months after the European Commission objected to acquisition on grounds that it would hobble or eliminate a competitor to Oracle’s database offering. The alleged conflict concerned Sun’s ownership of the open source MySQL code.
Joe Clabby, president and founder of Clabby Analytics, estimates that about half of Sun’s current workforce would be classified as sales, general and administrative overhead. And with Oracle CEO Larry Ellison already admitting that Sun is losing about $100 million per month in lost sales, the huge layoffs that UBS is predicting looks to be inevitable, he added.
“If you’re Oracle, you have your salespeople, so you really don’t need any of their managers or executives,” Clabby said, making his case for why all the cuts will be concentrated on sales and admin staff.
For Clabby, regardless of how Oracle handles the incoming Sun employees, Ellison will have a hard time achieving the investment goals it hoped when initially agreeing to the deal.
In November, Clabby recommended that Oracle either spin off MySQL to appeal the European Commission or renegotiate its $7.4-billion offer entirely
“I’d get the hell away from this deal as quickly as possible,” Clabby said following last year’s European Commission ruling. “If I were Ellison, I’d have a tough time justifying this at $7.4 billion.”
While Clabby continues to support an Oracle decision that would see the company either restructure its deal, drop MySQL to appease the EC, or walk away from the deal entirely, he admits that none of these moves will help salvage the fate of many Sun employees.
“Sun customers are also bailing out pretty rapidly,” Clabby said. “Some are moving over to IBM’s AIX on Power systems, others are moving to HP-UX on Titanium systems.”
If Oracle does indeed cut half of Sun’s staff when it takes full control of the company, the layoffs would be the third major round of cuts since August 2007. The company had more than 37,000 staff in mid-2006, according to The Register.
Oracle spokeswoman Deborah Hellinger did not respond to a request for comment on this story.