Sun Microsystems said it would cancel the development process of its certain new chips – the UltraSparc V and the Gemini. The move is aimed to improve the company’s financial positions and lower operating costs.

Sun has stopped work on the UltraSparc V, a server chip that was supposed to come out late next year, and Gemini, a dual-core chip for web-servers, a company spokeswoman confirmed to News.com web-site. The Santa Clara, California-based company believes that it has to make some “difficult choices”, like aborting the development process, in order to get back to profitability. Sun also plans to lay off 3300 employees, but many from the UltraSparc V and Gemini projects will remain at Sun, according to officials.

Even though the company discontinued development of some chips, Sun will still continue to create its own processors. Already this year the company is projected to release an improved version of UltraSparc IV – the UltraSparc IV+. In late 2006 the company is likely to unveil its multi-core, multi-threaded chip code-named Niagara; in 2007 Sun is anticipated to release another multi-core chip code-named Rock.

The legendary server company of the eighties and nineties, Sun Microsystems started to lose market share in the past several years after its processors, such as UltraSparc III, faced delays and appeared to be slower compared to competitors designed by companies like IBM or Intel.

While Sun is likely to continue offering processors from AMD and Intel in its web-servers, it is not clear what the company is planning to offer for its high-end 64-bit multiprocessor machines, as UltraSparc IV+ may not be the best choice for customers in the term of two and a half years.