Sun To Shed Up to 5K Jobs, Surplus Real Estate

Wednesday's announcement comes a one month after Scott McNealy stepped down as Sun's chief executive and two weeks after GlobeSt.com reported that the company was marketing its 1.4-million-sf campus in Newark, CA. The 11-building campus has 1.4 million sf of built space and room for three additional buildings totaling 400,000 sf. Local sources told GlobeSt.com at that time the property could fetch as much as $200 million, depending on the buyer.

In a conference call yesterday, Jonathan Schwartz, who replaced McNealy, said the company has begun exiting its Newark campus. "Based on our estimate of the net value we would ultimately realize from the sale or disposition of the campus, we expect a one-time charge of between $60 million and $110 million in the current fiscal quarter," said Schwartz. Expected annual savings from the disposition is estimated at between $30 million and $40 million is the campus can be vacated by July 1, he said.

Sun Microsystems also is considering the sale of other facilities, including those acquired through its recent acquisitions, said Schwartz. Any near term decisions regarding dispositions of acquired properties would result in an adjustment to the purchase price allocation and goodwill, he said. The specific properties were not disclosed.

The job cuts and real estate sales is part of a plan to help the company reach its goal of "at least" a 4% operating margin by the end of fiscal 2007. The long-term goal is for an operating margin of 10%, Schwartz said.

The Newark campus is comprised of 1.2 million feet of office and R&D space in 10 buildings and a 220,000-sf manufacturing warehouse. The campus also includes rights to develop an additional 400,000 sf of R&D space. Employees and operations on the Newark campus will relocate to other Bay Area-locations. Sun's other Bay Area locations include its 816,000-sf headquarters campus in Santa Clara and a one-million-sf campus in Menlo Park.

The Newark facility is being marketed by Michael Leggett of locally based Cornish & Carey and Michel Seifer, a locally based managing director with Chicago-based Jones Lang LaSalle. Seifer says the campaign will target potential users and institutional investors. A user likely would be willing to pay more for the property than an investor that would have to lease it up, according to local brokers.

In February, Sun Micro hired JLL to handle the facilities management, occupancy planning and move management for its global property portfolio, which includes about 17 million sf of office, lab and manufacturing facilities in 44 countries worldwide. Three months prior to that, Sun hired JLL to manage transactions, leases and development projects.

Sun's 17-million-sf portfolio includes about 9.3 million sf of leased and 7.7 million sf of owned space, a source with Sun tells GlobeSt.com. The leased space includes 3.3 million sf in the Americas (including two million sf in the Bay Area; 2.6 million in Europe, the Middle East and Africa; and 1.2 million sf in Asia. Much of the owned portfolio is located in the Silicon Valley, Denver and Boston areas).