Daily Archives: October 20, 2009

Sun Sheds 3,000 Employees

Weakened and under sustained competitive attack from HP and IBM while its acquisition by Oracle goes through an extended regulatory review at the European Commission (EC), Sun Microsystems will slash 3,000 employees during the next 12 months.

Oracle CEO Larry Ellison has said the ongoing delay in the consummation of the acquisition is costing Sun $100 million per month.

According to an SEC filing from Sun today:

Effective October 20, 2009, the Board of Directors of Sun Microsystems, Inc. (the “Company”), in light of the delay in the closing of the acquisition of the Company, approved a plan to better align the Company’s resources with its strategic business objectives, including reducing its workforce across the North America, EMEA, APAC and Emerging Markets regions by up to 3,000 employees over the next 12 months (the “Restructuring Plan”). The Company expects to incur total charges ranging from $75 million to $125 million over the next several quarters in connection with the Restructuring Plan, the majority of which relates to cash severance costs and is expected to be incurred in the second and third quarters of the fiscal year ending June 30, 2010.

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Layoffs at Fortinet?

Fortinet, a vendor of security appliances and a market leader in unified threat management (UTM), is rumored to be shedding staff. The company’s website says it has more than 1,000 employees.

As I learn more, I’ll provide an update.

Fortinet filed for an IPO during the summer. At the time, the company disclosed neither the price range of the offering nor how many shares it would issue. According to Morgan Stanley, a lead underwriter for the offering, the IPO prospectus is not yet available.

What’s Gartner Saying?

As I perused Gartner’s press release announcing its “top 10 technologies and trends that will be strategic for most organizations in 2010,” two of the listed items annoyed me, though for slightly different reasons.

At the top of Gartner’s list of top 10 strategic technologies is cloud computing, that much-discussed but nebulous technological phenomenon that is reputedly taking hold in the minds and planning processes of enterprises worldwide.

I am not going to take the position that cloud computing isn’t important, or that it doesn’t have a potentially lucrative future, but I am going to take the position, alongside Oracle CEO Larry Ellison, that it is ambiguously and poorly defined by most of those who like to talk about it.

Alas, Gartner is no exception to that rule. Gartner, coming down the mountain with its tablet of 10 strategic technologies, says the following on the subject:

Cloud computing is a style of computing that characterizes a model in which providers deliver a variety of IT-enabled capabilities to consumers. Cloud-based services can be exploited in a variety of ways to develop an application or a solution. Using cloud resources does not eliminate the costs of IT solutions, but does re-arrange some and reduce others. In addition, consuming cloud services enterprises (sic) will increasingly act as cloud providers and deliver application, information or business process services to customers and business partners.

Could that have been more muddled? Does anybody understand what Gartner is on about? Shouldn’t we expect a modicum of clarity and cogency from a research firm that is paid so richly to tell enterprises and IT vendors what to think?

Yes, my apoplexy is in full-tilt boogie. But I feel my cause is righteous. So-called thought leaders should express their thoughts articulately and clearly. Coherence and intelligibility should not be negotiable.

Further down the list, Gartner says the following about another allegedly strategic technology, social computing:

Workers do not want two distinct environments to support their work – one for their own work products (whether personal or group) and another for accessing “external” information. Enterprises must focus both on use of social software and social media in the enterprise and participation and integration with externally facing enterprise-sponsored and public communities. Do not ignore the role of the social profile to bring communities together.

Again, the sentence structure and wording leave something to be desired, but I’ll put that objection aside. What I will not put aside, however, is my complaint that Gartner has not put forward a compelling reason for enterprises to countenance their employees spending time on social-networking sites while at the office, presumably during business hours.

Really, what’s the business case for untrammeled Facebook access at work? Shouldn’t employees who report to the office, you know, actually work there? Does Gartner realize that Facebook owns the content posted to it? How does that adhere to corporate or government policies relating to information confidentiality?

What’s the ROI-related business case for allowing employees to spend time on Facebook or MySpace? It’s impossible to know, because Gartner has stated no clear business argument for opening the social-networking floodgates.

I’m taken aback that Gartner has issued this press release. Not enough thought has gone into the substance and presentation of its content. That should be a worrying sign for the clientele that pay the company for its research and opinions.

Cisco Will Dip a Bit Deeper into Foreign Cash to Secure Tandberg Deal

Although I doubt a rival bidder will attempt to wrestle Cisco Systems for the ultimate ownership of Tandberg, I think the networking giant will graciously but grudgingly acquiesce to the dissident Tandberg shareholders who want Cisco to pay a higher premium for the Norway-based videoconferencing-systems vendor.

How much higher than the standing $3-billion offer will Cisco have to go to capture 90-percent approval from Tandberg’s shareholders by November 9, the date on or before which the transaction must go through?

My guess is that Cisco won’t have to boost the offer all that much. It won’t, for example, have to raise the bid by another billion dollars. It might end up paying another $400 million, give or take $100 million drawn from Cisco’s gigantic foreign cash reserves, which accounted for $29 billion of its $35-billion cash hoard as of the beginning of October.

What you ought to bear in mind is that the recalcitrant Tandberg shareholders are under a lot of pressure to meet Cisco halfway. Tandberg’s board members unanimously endorsed the Cisco takeover proposal, and it doesn’t appear that a “white knight” acquirer is waiting backstage to make a dramatic late entrance. The restive Tandberg shareholders have a little leverage — Cisco really wants this deal to happen, as it provides valuable synergies for a Cisco telepresence product portfolio that has been decidedly top heavy — but they don’t want to overplay their hand.

At the end of the day, cooler heads will prevail on both sides of the divide. Cisco will offer a bit more of its prodigious foreign cash, and enough of the refusenik Tandberg shareholders will respond favorably to the sweetened bid to get the deal done.

Nokia and Siemens Both Want Out of NSN

Yesterday I wrote that joint venture Nokia Siemens Networks (NSN) wasn’t in a position to contend for insolvent Nortel’s optical- and Ethernet-networking assets, which have received a stalking-horse auction bid of $521 million in cash and stock from Ciena.

Previously, I had wondered whether the joint venture’s two parent companies, especially Siemens, would remain committed to the struggling spinoff endeavor. Both parents have said they would incur massive goodwill writedowns on the joint venture, but they made encouraging noises about keeping it going and getting it back on track.

Behind the scenes, however, both companies are thinking long and hard about whether NSN warrants further expenditures of time, effort, and — most important of all — money.

If a report in Financial Times Deutschland, as referenced by Reuters, is correct, Nokia and Siemens would like to sell their stakes in the joint venture, but they are hard pressed to find a buyer for the tarnished asset.

Said sources familiar with the situation:

“Siemens has been wanting to get out for some time, Nokia now (wants out) too.”

“I cannot imagine that NSN in its current state could be of any interest to a financial buyer.”

Beaten like a drum by competitors Ericsson and Huawei in the wireless-networks market, Nokia Siemens Networks has been losing market share and money. In the July-September quarter, the joint venture sustained an operating loss of 53 million euros ($78.88 million), with losses expected to extend through the current quarter and likely beyond.

The joint venture is cutting costs wherever possible, including through outsourcing of managed application services, but the prospects for near-term revenue growth aren’t bright.

Not particularly enamored of its IT-related investments lately, engineering conglomerate Siemens AG apparently would like a complete exit from telecommunications.