Update: Sun CEO McNealy steps down; company posts $217M loss

IDG News Service - Sun Microsystems Inc. CEO Scott McNealy has stepped aside as head of the company, an announcement made on the same day Sun reported a loss of $217 million for its most recent fiscal quarter.

McNealy, one of the most visible, outspoken and sometimes combative CEOs in Silicon Valley, announced during a conference call to discuss the financial results that Jonathan Schwartz has been chosen by the board of directors to take over as CEO effective immediately.

Schwartz, 40, is McNealy's righthand man and has been long groomed for the top job. He had been serving as president and chief operating officer and has been with Sun for 10 years.

“He’s ready,” said McNealy, 51. He called the leadership change “a big moment in Sun’s history." McNealy, who co-founded Sun, will remain as chairman.

Schwartz promised a "comprehensive review" of all aspects of the company, including its technology and current investments. "We view the opportunity, quite literally, as planetary in scope," he said.

Schwartz put particular emphasis on research and intellectual property development, which now gets about $2 billion in spending annually.

The upcoming review is "not to figure out how to take a whack at head count," said Schwartz, who nonetheless indicated that cuts in some areas are possible. He said the company would be "pruning" those areas that aren't yielding returns.

Schwartz also started making leadership changes, announcing that Sun's chief technology officer, Greg Papadopoulos, would serve as executive vice president of research and development. There will also be a change in leadership style, with an emphasis on teamwork, and Schwartz said he would share an office with Mike Lehman, Sun's chief financial officer.

McNealy doesn't plan on fading away. He expects to spend more time traveling and meeting with customers and will serve as chairman of Sun Federal Inc., which is responsible for Sun’s government business.

The change also does not represent a strategic shift in direction at Sun. Schwartz has served in a range of posts across the company, including head of its software division. When Schwartz and McNealy share a stage to talk about Sun’s products, it’s obvious that they are in sync. Such was the case today on the conference call, as McNealy emphasized their shared outlook by calling himself and Schwartz “highly aligned.”

“The time is right. Our product line is fixed. We're winning benchmarks and awards across the board, [and] our customers are probably happier with us then they have been with us in a long time,” said McNealy.

Reprinted with permission from

IDG.net
Story copyright 2009 International Data Group. All rights reserved.