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Sun To Cut 13,800 Jobs Following Oracle Acqusition?

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Internetnews.com has reported that Brent Thill, an analyst at global financial services company UBS AG has reported that Oracle may fire up to half of Sun Microsystems’ employees, when it finally closes its $7.4 billion takeover bid. According to U.S. Securities and Exchange Commission filings, Sun employed almost 27,600 people in September, which puts USB AG’s predicted cuts at around 13,800 jobs.

Thill estimates that these cutbacks will be necessary if Oracle is to achieve the $1.5 billion the company is seeking in non generally accepted accounting principles (GAAP) operating profit in the first full year after closing the deal. Oracle aims to increase this to over $2 billion in the second year.

Thill acknowledged that Oracle has an excellent track record with mergers and acquisitions, but warned that “Sun could be its toughest challenge yet” and that Oracle would struggle to meet its targets following the acquisition. “In order to hit Oracle’s goal of $1.5 billion in operating income, we estimate that revenue growth needs to be no worse than a 10 percent decline vs. FY09 and pro forma operating margin around 15 percent,” Thill wrote. He foresaw several barriers to Oracle achieving its $1.5 billion non-GAAP profit within the initial twelve month period, including shrinking revenues, low margins and potential conflict with long-time partners HP and Dell.

Larry Ellison, Chief Executive of Oracle, has previously claimed that Sun Microsystems was losing about $100 million a month as European regulators delayed the acquisition and Sun’s customers started migrating to rival companies. “The longer this takes, the more money Sun is going to lose, and that’s not good for anybody. We want to get this done to save as many jobs as possible,” Ellison said, back in September.

The acquisition was announced back in April 2009, and approved by Sun shareholders on July 16, 2009. However, the process was delayed after the European Commission announced a second round of investigations, focusing on Sun’s open source relational database management system MySQL, which is a direct competitor of Oracle Corporation’s other database products.

The European Commission has until the 27thJanuary 2010 to clear or block the deal. Oracle had originally planned to close the deal by the end of August, 2009.

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