You need the e modifier:

$text =~ s/(\d+)/munge($1)/eg;
                           ^
                           |
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Also, it should be:

my $number = shift;
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Update: Or, if you prefer engineering notation, you could try the "eng_not" sub below instead of your "munge". It's just something I have lying around:

sub eng_not {
   # Format a numeric value using engineering notation.
   # Examples:
   #   1234 --> 1.23k
   #   5e-5 --> 50u
   my $num = shift;
   my $mult;
   my $prefix;
   my $val;
   my $sign = ($num<0) ? '-' : '';

   $num = abs $num;

   if ( ($num > 1e15) || ($num < 1e-15) ) { return sprintf '%3.2e', $n
+um }
   if    ($num > 1e12)   { $prefix = 'T'; $mult = 1e12;  }
   elsif ($num > 1e9)    { $prefix = 'G'; $mult = 1e9;   }
   elsif ($num > 1e6)    { $prefix = 'M'; $mult = 1e6;   }
   elsif ($num > 1e3)    { $prefix = 'k'; $mult = 1e3;   }
   elsif ($num > 1e0)    { $prefix = '' ; $mult = 1e0;   }
   elsif ($num > 1e-3)   { $prefix = 'm'; $mult = 1e-3;  }
   elsif ($num > 1e-6)   { $prefix = 'u'; $mult = 1e-6;  }
   elsif ($num > 1e-9)   { $prefix = 'n'; $mult = 1e-9;  }
   elsif ($num > 1e-12)  { $prefix = 'p'; $mult = 1e-12; }

   $val = sprintf '%f', $num/$mult;
   $val = substr($val,0,4);    # only want 3 digits and decimal point
   $val =~ s/0$//;     # delete 1st trailing 0, if any
   $val =~ s/0$//;     # delete 2nd trailing 0, if any
   $val =~ s/\.$//;    # delete trailing decimal point, if any
   return $sign . $val .  $prefix;
}
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