Earlier today, Kara Swisher reported in BoomTown that RealNetworks (RNWK) would sack four percent of its workforce–70 employees out of its 1,700-person staff.

Below, the official internal memo from RealNetworks Founder, Chairman and CEO Rob Glaser, breaking the bad news:

Team–

I’m writing to share some important and unpleasant news with all of you. Today we are implementing a reduction in force primarily within our TPS and MSS divisions, as well as in a few of our shared services groups. Approximately 70 employees around the globe are impacted, which represents about 4% of our total workforce. Of these 70 employees, 51% are located within the US and 49% came from our international locations.

These staff reductions are a result of some trends and strategic decisions in our TPS and MSS businesses. I’d bucket the reductions into three categories–efficiency gains associated with eliminating or streamlining duplication of effort, businesses that have been impacted by the recession and/or cyclical downturns where we need to lower our costs and get more efficient, and slower growth businesses in which we have decided to reduce our investments so we can instead invest in areas with better growth prospects.

As a result of these changes being made today, the TPS and MSS divisions are now better positioned to continue to weather the economic storm in the short-term and to thrive and grow in the long-term. On behalf of everyone on the senior management team I would like to extend my thanks and appreciation to everyone being affected by today’s actions for their contributions to our company. We are offering all impacted employees generous severance packages and we are working closely with the affected teams to ensure a smooth and professional transition. Additionally, we are encouraging impacted employees to look for other roles within the company, and HR will assist them in this process.

Thank for your support and understanding.

Rob

“I understand the European Union has a job to do, but the longer this takes, the more money Sun is going to lose and that’s not good. We want to get it done to save as many jobs as we can.”

– Oracle CEO Larry Ellison

The end of Sun Microsystems as an independent company after 27 years is to be prefaced with a bloodletting. And a big one too. The company is sacking some 3,000 employees as it awaits the closing of Oracle’s (ORCL) planned $7.4 billion takeover.

That’s about 10 percent of its workforce.

The cuts, which were disclosed in a regulatory filing today, are to occur in all markets in which Sun (JAVA) has a presence and will be completed over the next 12 months. Sun expects to incur cash severance and other charges of $75 million to $125 million over the next several quarters as a result.

Seems Oracle CEO Larry Ellison wasn’t kidding when he said further delays in approving his company’s deal to buy Sun would cost more people their jobs.

Ugly news for Sun, which has already made sweeping job cuts over the past year, releasing some 6,000 employees into the wild since last November.

Oracle and Sun have not yet responded to requests for comment.

UPDATE: Oracle has declined to comment on the layoffs at Sun.

Good thing Wall Street wasn’t expecting much from Microsoft. Because it didn’t get it.

After market close Thursday, the Redmond, Wash.-based tech giant reported that fiscal fourth-quarter net income fell to $3.05 billion, or 34 cents a share, from $4.3 billion, or 46 cents a share, in the same period a year earlier.

Revenue for the period ended in June fell 17 percent to $13.1 billion. Wall Street had been looking for earnings of 36 cents a share on $14.37 billion in revenue, according to data compiled by Thomson Reuters.

Online advertising revenue decreased $86 million, or 14 percent, to $529 million, primarily reflecting a decline in display advertising.

The company missed estimates by $1 billion. Gruesome.

“Our business continued to be negatively impacted by weakness in the global PC and server markets,” CFO Chris Liddell said in a statement. “In light of that environment, it was an excellent achievement to deliver over $750 million of operational savings compared to the prior year quarter.”

Microsoft shares are trading down more than eight percent at $23.50, as I write this.

Below is the full earnings release. BoomTown’s Kara Swisher will be liveblogging the earnings call later this afternoon.

Microsoft Reports Fourth-Quarter Results

The company delivered operational efficiency and innovation in a difficult environment

REDMOND, Wash., July 23, 2009–Microsoft Corp. today announced revenue of $13.10 billion for the fourth quarter ended June 30, 2009, a 17% decline from the same period of the prior year. Operating income, net income and diluted earnings per share for the quarter were $3.99 billion, $3.05 billion and $0.34 per share, which represented declines of 30%, 29% and 26%, respectively, when compared with the prior year period.

“Our business continued to be negatively impacted by weakness in the global PC and server markets,” said Chris Liddell, chief financial officer at Microsoft. “In light of that environment, it was an excellent achievement to deliver over $750 million of operational savings compared to the prior year quarter.”

The financial results for the fourth quarter ended June 30, 2009, included the deferral of $276 million of revenue related to the Windows 7 Upgrade Option program that was announced on June 25, 2009. This revenue deferral reduced earnings per share by $0.02.

The fourth-quarter financial results also included $193 million of legal charges, $108 million of impairments to investments and $40 million of additional severance charges related to the previously announced plan. Operating expenses were reduced by $105 million of capitalized research and development expenses due to the technical milestones reached for Windows 7. Combined, these items also reduced earnings per share by $0.02.

Significant product milestones were achieved in the quarter including the releases of Windows 7 release candidate, Windows Server 2008 R2 release candidate, as well as Bing, Microsoft’s search engine designed to help people make faster, more informed decisions.

For the fiscal year ended June 30, 2009, Microsoft reported revenue of $58.44 billion, a 3% decline from the prior year. Operating income, net income and diluted earnings per share for the year were $20.36 billion, $14.57 billion and $1.62, which represented declines of 9%, 18% and 13% respectively.

“While economic conditions presented challenges this year, we maintained our focus on delivering customer satisfaction and providing solutions to our customers to save money,” said Kevin Turner, chief operating officer at Microsoft. “I am very excited by the wave of product and services innovations being delivered in this next fiscal year.”

Business Outlook

Microsoft is providing operating expense guidance of $26.6 billion to $26.9 billion, for the full year ending June 30, 2010.

Management will discuss fourth-quarter results and the company’s business outlook on a conference call and webcast at 2:30 p.m. PDT (5:30 p.m. EDT) today.

An inadvertent administrative error occurred that resulted in an overpayment in severance pay by Microsoft. We ask that you repay the overpayment and sincerely apologize for any inconvenience to you.”

– Excerpt from Microsoft’s severance repayment request

Well, that didn’t take long at all.

Microsoft (MSFT) has thought better of its decision to ask some of the 1,400 people sacked last month to return part of their severance packages. Days after distributing a letter to an unknown number of former employees requesting repayment of accidental severance overpayments, the company has reversed course. It no longer wants its money back. Why? “I thought it didn’t make sense for us to continue on the path we were on,” Microsoft human resources chief Lisa Brummel told News.com.

Apparently, at some point over the weekend, the cost of the PR nightmare those repayment requests created became equal to the total cost of the overpayments, making further pursuit of the money even more foolish than it was originally. And how foolish is that? Well, Microsoft says 25 workers were overpaid (20 were underpaid) on average, about $4,000 or $5,000. So we’re talking $125,000 here, max. Hardly worth the beating the company’s taken over the debacle since it was first reported.

The fourth was Yahoo’s first money-losing quarter since 2002, and the first time its revenue declined since the fourth quarter of 2001.

Said incoming CEO Carol Bartz, “The company also made important investments while aggressively managing costs, leaving us better positioned to weather the economic downturn and emerge stronger when advertiser spending improves. We have work to do, but I am excited by Yahoo!’s opportunities, and encouraged by the tremendous innovation and momentum I’ve seen since joining the company as CEO.”

Here’s the official release:

Yahoo! Reports Fourth Quarter and Full Year 2008 Financial Results

“Despite the challenging economic environment, Yahoo! delivered adjusted operating cash flow above the midpoint of guidance for the fourth quarter,” said Yahoo! Chief Executive Officer Carol Bartz. “The company also made important investments while aggressively managing costs, leaving us better positioned to weather the economic downturn and emerge stronger when advertiser spending improves. We have work to do, but I am excited by Yahoo!’s opportunities, and encouraged by the tremendous innovation and momentum I’ve seen since joining the company as CEO.”

Fourth Quarter 2008 Financial Results

• Revenues were $1,806 million for the fourth quarter of 2008, a 1 percent decrease compared to $1,832 million for the same period of 2007.
• Marketing services revenues were $1,594 million for the fourth quarter of 2008 compared to $1,590 million for the same period of 2007.
• Marketing services revenues from Owned and Operated sites were $1,063 million for the fourth quarter of 2008, a 3 percent increase compared to $1,035 million for the same period of 2007.
• Marketing services revenues from Affiliate sites were $531 million for the fourth quarter of 2008, a 4 percent decrease compared to $555 million for the same period of 2007.
• Fees revenues were $212 million for the fourth quarter of 2008, a 12 percent decrease compared to $242 million for the same period of 2007.
• Revenues excluding traffic acquisition costs (“TAC”) were $1,375 million for the fourth quarter of 2008, a 2 percent decrease compared to $1,403 million for the same period of 2007.
• Operating loss for the fourth quarter of 2008 was $278 million compared to operating income of $191 million for the same period of 2007.
• Operating loss before depreciation, amortization, and stock-based compensation expense for the fourth quarter of 2008 was $60 million compared to operating income before depreciation, amortization, and stock-based compensation expense of $527 million for the same period of 2007.
• Adjusted operating income before depreciation, amortization, and stock-based compensation expense for the fourth quarter of 2008 was $542 million, excluding restructuring charges of $108 million for severance, facilities, and other restructuring costs; a goodwill impairment charge of $488 million related to our international segment; and incremental costs of $7 million incurred for outside advisors related to Microsoft’s proposals to acquire all or a part of the Company, other strategic alternatives, including the Google agreement, the proxy contest, and related litigation defense (collectively, the “strategic alternatives and related matters”).
• Cash flow from operating activities for the fourth quarter of 2008 was $321 million, a 48 percent decrease compared to $622 million for the same period of 2007.
• Free cash flow for the fourth quarter of 2008 was $219 million, a 34 percent decrease compared to $330 million for the same period of 2007.
• Net loss for the fourth quarter of 2008 was $303 million or $0.22 per diluted share compared to net income of $206 million or $0.15 per diluted share for the same period of 2007.
• Non-GAAP net income for the fourth quarter of 2008 was $238 million or $0.17 per diluted share compared to non-GAAP net income of $184 million or $0.13 per diluted share for the same period of 2007.

PREVIOUSLY:

• Carol Bartz: The ALL CAPS CEO
• Yahoo Investors: We Would Have Preferred Steve Jobs…

The plaintiffs, who claim the severance plan makes any takeover of the company prohibitively expensive, had requested a trial before Yahoo’s annual shareholders meeting on Aug. 1. They argued that the plan, and Yahoo’s recently announced advertising deal with Google (GOOG), might unfairly bias Yahoo shareholders against efforts to replace the company’s board.

But the judge, who complained of the “media maelstrom” shareholders have created around the issue, didn’t buy it. And rather than expediting the case, he said he planned to set a “prompt” schedule for hearing Yahoo’s motion to dismiss it.

As I said, lucky break.

Photo of Judge Wapner from “The People’s Court.”

In a speech to reporters at the New York Financial Writers’ Association annual awards dinner last night, the billionaire investor–clearly irked by Yahoo’s latest SEC filing–let loose on the company, accusing it of “sinking to a new low.” Yahoo’s severance plan, which Icahn argues was designed to make any takeover of the company prohibitively expensive, is obscene, said the investor. It’s “an insult to our intelligence … a complete, total … I don’t want to use bad words … a travesty,” he added. For the people Microsoft (MSFT) wants to keep, Icahn maintained, the severance plan “will make it easier for them to leave.” And then, just in case anyone was still unclear on Icahn’s view of the company’s leadership, he offered up the following brief performance review:

Yahoo has done terribly. The board has done an abysmal job.”

Mess with the bull, you get the horns. And if Yahoo’s board persists in messing with Icahn, it may get them in the form of a lawsuit. “If they continue with this line,” the investor told Reuters, “I believe they (the board) may be personally liable.”

In an SEC filing late today, the company noted that it cannot simply terminate the severance plan, as some shareholders, and one in particular, would like. From Yahoo’s filing:

Can the board simply terminate or cancel the plan now as suggested by Mr. Icahn?
No. Under the terms of the plan, it cannot be terminated once a person has publicly announced the intention to take an action, which if consummated, would constitute a change in control until one month following the abandonment of the potential change in control. The actions covered include, among others, the announcement by any person of an intention to acquire the company as well as a proxy contest to take over a majority or more of the board (such as that announced by Mr. Icahn). Accordingly, the plan can’t currently be terminated or canceled. The plan can be terminated one month following the abandonment of the actions creating a potential change in control.”

Suffice to say, the litigious among Yahoo’s shareholders are not at all pleased with this particular feature of the plan and have filed a motion requesting a trial to remove it before Yahoo’s annual meeting in August. “A prompt trial on the validity of the severance plans is now essential and appropriate,” they argued in a brief filed today, “not least because Yahoo’s board disabled itself from rescinding the severance plans during the pendency of a proxy fight, even if doing so is essential to realizing a favorable deal, and because Icahn’s slate is barred from rescinding the severance plans if it prevails in its proxy contest.”

“Until now I naively believed that self-destructive doomsday machines were fictional devices found only in James Bond movies,” Icahn wrote, referring to Yahoo’s highly unusual severance plan that would have rewarded employees who left the company after a change in ownership. “I never believed that anyone would actually create and activate one in real life. I guess I never knew about Yang and the Yahoo Board.”

Doomsday machines? James Bond movies? Did Yahoo appoint Richard Kiel to its board and not tell anyone?

Oh, and by the way, the name’s Icahn … Carl Icahn.

His letter follows.

Dear Mr. Bostock:

I have long been cynical about the effectiveness of many of the boards and CEOs in this country and as a result the inability of our companies to compete. I have constantly complained about how far CEOs and boards will go in order to retain their jobs, yet even I am amazed at the length Jerry Yang and the Yahoo board have gone to in order to entrench their positions and keep shareholders from deciding if they wished to sell to Microsoft.

According to details in a complaint that I became aware of yesterday (details Yahoo fought to keep under seal), Jerry Yang and a majority of the board went to inordinate lengths to sabotage a Microsoft bid. The complaint states: “Viewing employee retention as Microsoft’s Achilles heel, Yang engineered an ingenious defense creating huge incentives for a massive employee walkout in the aftermath of a change in control. The plan gives each of Yahoo’s 14,000 full-time employees the right to quit his or her job and pocket generous termination benefits at any time during the two years following a takeover, by claiming a ’substantive adverse alteration’ in job duties or responsibilities.” The damage to Microsoft “is compounded by the fact that Yahoo’s thousands of engineers, known as ‘Technical Yahoos!,’ have detailed job responsibilities and qualifications.”

Most importantly, Microsoft might never be able to trust a CEO and board who, while claiming to be negotiating in good faith, went behind their back and adopted a “plan” which not only sabotages any Microsoft acquisition but went so far as to completely disable its own ability to rescind the “plan” as long as Microsoft’s offer remains pending. Until now I naively believed that self-destructive doomsday machines were fictional devices found only in James Bond movies. I never believed that anyone would actually create and activate one in real life. I guess I never knew about Yang and the Yahoo Board. In my opinion, it will be extremely difficult for Microsoft or other companies to trust, work with and negotiate with a company that would go to these lengths.

It is insulting to shareholders that Yahoo for the last month has told us that they are quite willing to negotiate a sale of the company to Microsoft and cannot understand why Microsoft has walked away. However, the board conveniently neglected to inform shareholders about the magnitude of the plan it installed which made it practically impossible for Microsoft to stay at the bargaining table. Could this have been the problem?

Even more deceitful are Yahoo’s actions toward its own employees, for whom you claimed to have set up the “plan”. Management neglected to mention to these same employees that Microsoft in its proposals had earmarked $1.5 billion of retention incentives (representing over $100,000 per employee) meant to allay any employee concerns.

Ironically, according to the complaint, this is not the first time that Yahoo has denied shareholders the opportunity of selling to Microsoft at a large premium. According to the complaint, in January 2007 Microsoft offered to purchase Yahoo at $40 per share but the company rejected that proposal. On January 31, 2008, Steve Ballmer emailed a letter to Jerry Yang and Roy Bostock making a new proposal of $31 per share. The letter recounts Microsoft’s prior efforts to acquire Yahoo and noted that Microsoft had given Yahoo time to implement business strategies designed to turn the company around. These strategies obviously didn’t work. The letter went on to state: “Our proposal represents a 62% premium above the closing price of Yahoo! common stock of $19.18 on January 31, 2008.” Yahoo not only turned down this proposal but sabotaged it. An article in CNET News cited in the complaint sums it up by stating, “Yahoo may indeed agree to Microsoft’s [offer], but it will be over Jerry Yang’s dead body”.

I and many of your shareholders believe that the only way to salvage Yahoo in the long if not short run is to merge with Microsoft. However, because of HSR considerations, to complete a merger of this magnitude will take a period of time. Even if by some stretch of the imagination the Yahoo board finally determines to do the rational thing and sell the company, I fear that, in light of Yang and the board’s recent actions in response to Microsoft’s overtures, it may be too late to convince Microsoft to trust Yang and the current board to run the company during that period while Microsoft sits on the sidelines with $45 billion at risk. Therefore, the best chance to bring Microsoft and Yahoo together is to replace Yang and the current Yahoo board with a board that will negotiate in good faith with Microsoft and in whom Microsoft will have trust to operate the company during the long period between signing and closing.

You stated in a press release yesterday that, “Yahoo’s board of directors including Jerry Yang has been crystal clear that it would consider any proposal by Microsoft that was in the best interests of its shareholders.” However this is not crystal clear to me. You have allegedly turned down a $40 offer. You have turned down and sabotaged a $33 offer. Instead, you appear willing to negotiate an “alternative” deal that in my opinion will be worth less than $33 but will entrench the board and Jerry Yang. I understand how these actions are in the best interests of management and a board whose members each receive $40,000 per month for several days work, but it is hard for me to understand how these actions are in the “best interests of the shareholders.”

However, despite your actions to date, there is still some possibility that you can resuscitate a Microsoft offer for the company. The board can rescind the “severance plan” that is the largest impediment to a Microsoft deal. You currently can do this because Microsoft withdrew their bid 30 days ago. It is time for you to stop misleading your shareholders with respect to Microsoft. It has been reported today that when asked to talk about the Microsoft bid, Sue Decker indicated that Microsoft made an offer which Yahoo’s board didn’t feel was at an attractive enough price. However, one doesn’t have to be a rocket scientist to realize there is a simple method to possibly achieve a higher price. Simply rescind the poison pill “severance plan”, which would free up approximately $2.4 billion and possibly even more which could be added to the bid. It is also time to admit to your shareholders that the severance plan was not done for your employees (who you conveniently neglected to inform that Microsoft had earmarked $1.5 billion in retention incentives for), but rather was done simply as an entrenchment device and to impede a Microsoft bid. If you are not completely disingenuous in your protestations concerning doing “the right thing” for shareholders, you should rescind the severance plan expeditiously and determine if Microsoft is still willing to purchase our company and thereby create a true competitor for Google. I can only hope that you will finally do what is in the “best interests of the shareholders.”

Sincerely yours,

CARL C. ICAHN

But that’s just a sidenote to the larger issues in the suit, which charges Yahoo’s directors with breach of fiduciary duty for not just rejecting Microsoft’s proposed deal, but also for going to great lengths to make it an unappealing acquisition target. “Due to their personal interests in maintaining Yahoo’s independence and their strong antipathy to Microsoft, [Yahoo co-founders Jerry Yang and David Filo] failed to consider and respond in good faith to the acquisition offers by Microsoft to the detriment of Yahoo and its shareholders,” the complaint argues. The two “used the threat of pursuing measures that make Yahoo an unattractive acquisition target, including the prospect of Yahoo abandoning its long-term business strategy in favor of a tie-up with Google that would make a Microsoft acquisition a regulatory and litigation quagmire, as an improper means to thwart Microsoft’s advances.” Moreover, “Yang convinced the board to adopt change-in-control employee severance plans that impose tremendous costs and risk for an acquirer, throwing sand in the gears of Microsoft’s plans for a smooth integration. These highly unusual plans reward employees with rich benefits if they quit and claim a constructive termination in the aftermath of a change in control.”

The plans at issue here, which would have cost Yahoo $1.5 billion, provided 100% equity acceleration for all employees. It is “a bizarre outcome if people who stick around make off worse financially than people who are laid off,” one Yahoo VP said of the plan. The company’s compensation consultant had a better word for it: “nuts.”

What was it Yang said during his interview at D6 last week? “I will probably never be a CEO again?“

Hey, he said it, not I.