SANTA CLARA, CA -- Sun Microsystems will lay off 11 to 13% of its workforce and shut down some of its North American campuses as it seeks to regain profitability.

The server OEM said it would lay off between four and five thousand employees and sever its Newark campus and Sunnyvale, CA, leases. The moves are expected to save as much as $590 million in annual operating expenses.
Sun set a target of June 2007 for return to profitability. Sun said it expect to show an operating profit of about 4% of sales for that quarter.

The company's longer-range targets include revenue growth in the low to middle single digits in the 12 months ending in June 2007 and for gross margins of 43% in fiscal 2007, leading ultimately to operating income of 10% of sales.

Analyst Chris Whitmore of Deutsche Bank Equity Research wrote in a resdearch note today, "While we are pleased to see Sun focus on rationalizing its business and reducing costs, we remain concerned about Sun's long-term growth potential and believe 10% operating margins will be difficult to attain."

Going forward, Sun said it will focus on its Open Solaris, Java and UltraSPARC platforms.

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