F. Scott Fitzgerald once observed: "There are no second acts." But then he never met Michael Lehman. In Act One, between 1993 and 2002, Lehman served as CFO of Sun Microsystems Inc. It was a heady time at the San Francisco-based tech company when sales nearly doubled, to $18.3 billion, and its stock hit $60. Then, the industry collapsed and the curtain came down.
In Act Two, earlier this year, Lehman comes out of retirement to navigate a Sun turnaround, relying on three levers to change its cost structure. "The first was painful," says the 56-year-old Lehman about a 4,000-employee cut, "but we had to do it." The second is an overhaul of major systems, which will result in a single instance enterprise resource planning (ERP) system worldwide and save several
hundred million when completed next year.
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The final lever is restructuring Sun's real estate. Sun downsized to two campuses from three, saving $250 million and increasing density. And there are no exceptions: Lehman shares an office with the CEO. "We have a lot to talk about," he jokes.
Sun also has changed a lot since Act One. It no longer does its own manufacturing, and thanks to its One Touch supply chain effort, products ship directly to customers from Sun's contract manufacturers, cutting logistics costs by 20%, or $20 million. "We had to decide what we're good at and where to invest our resources," says Lehman. Metrics revolving around innovation help guide those decisions. "We look at gross margin dollars generated by R&D," he says.
Sun's efforts are paying off: In the critical server market, its market share grew in the last quarter, while IBM, Hewlett-Packard and Dell declined, according to market researcher IDC Worldwide. In a turnaround, it's key that the "CEO and CFO be united in their vision and strategy," says Lehman. "The second thing is to be decisive, set up measurable goals and then go out and achieve them in the near-term. You need to establish credibility quickly and then you need to deliver against that."
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