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Sun Microsystems Burned to a Crisp

"It would be damaging to the long term health of the company to take arbitrary action just to hit that number," he later added.

Sun will nevertheless take various steps to cut costs, including cutting between 1,500 and 2,500 employees from its workforce. Sun currently has more than 34,000 employees. The layoffs will mean a $130 million to $220 million charge in the fiscal fourth quarter, and should lead to annual savings of $100 million to $150 million.

The job cuts are the third major layoffs since Schwartz took over.

While the cost-cutting has helped Sun improve its profitability, sales growth continues to remain elusive. And with the souring U.S. economy, Sun's growth prospects only look bleaker.

Meanwhile, tech firms like Intel (INTC), VMware (VMW) and IBM (IBM) have continued to deliver solid results despite the slowing economy. In fact, IBM even cited strength in the U.S. market.

Sun executives said its troubles were not the result of market share loss to competitors like IBM, despite the two companies diverging results in the quarter.

For the three months ended March 30, Sun's revenue declined 0.5% year-over-year to $3.26 billion, below the average analyst expectation of $3.37 billion.

"During March, we saw a substantive change in U.S. sentiment," Schwartz said, as orders from large customers were pushed out, and Sun's distribution partners experienced slower-than-expected sales. The result, Sun executives said, was that revenue came in about $200 million lighter than the company's internal expectations.

The slowdown was most pronounced at the high-end of Sun's product lines, particularly for enterprise servers and tape-storage systems. Revenue in Sun's computer systems business declined 1.8% year-over-year, while the company's storage revenue fell 5.4%.

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