CA, Sun Still Looking for Answers: Users applaud choice of Schwartz as Sun's CEO but want more changes

Wall Street investors aren't the only group looking for some tangible improvements from new Sun Microsystems Inc. CEO Jonathan Schwartz, who took over for Sun co-founder Scott McNealy last week. Users also ticked off a list of changes they want Sun to make, although they largely viewed Schwartz's appointment as a sign of management continuity at the company.

Sun Microsystems Inc. CEO Jonathan Schwartz
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Sun Microsystems Inc. CEO Jonathan Schwartz
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Sam Thomas, information systems supervisor for the city of Oakland, Calif., said Sun needs to make its sales organization easier for customers like him to work with. The city uses a range of Sun systems and storage equipment, but Thomas said Sun has too many layers of managers that have to get involved in decisions on sales issues -- a problem that has persisted for years.

"The salesman had to go talk to his boss, his boss had to talk to his boss, and then his boss talked to his boss -- and then the decision would trickle down," Thomas said. "When you want an answer, you want an answer."

Daniel Grim, executive director of networks and systems at the University of Delaware in Newark, called on Schwartz to improve the support for Solaris running on Sun's Opteron-based x64 systems among independent software vendors.

"I'd like to have a better understanding of what their strategic directions really are relative to Sparc vs. Opteron," Grim said. "We're excited about the Opteron-based systems, but we also like to run Solaris, and we don't see [independent software vendors] following Solaris onto Opteron."

Grim added that having Linux available on the x64 line isn't a big selling point for Sun in his IT shop. "We can buy machines that run Linux from lots of people," he said.

Schwartz's Burdens

Concerns such as the ones voiced by Thomas and Grim are now entirely Schwartz's problem. He was named to replace McNealy -- one of the most combative, colorful and outspoken vendor executives in the IT industry -- as CEO on the same day that Sun reported a net loss of $217 million for its third quarter. However, revenue grew 21% year over year to $3.18 billion. That was partly a result of the addition of revenue from Storage Technology Corp., which Sun bought last August. The growth prompted McNealy to say that the company's operations have been "stabilized" after years of financial struggles.

McNealy has said in the past that he and Schwartz, who previously was Sun's president and chief operating officer, were "joined at the hip." And during a joint conference call last week, McNealy -- who will continue as Sun's chairman and remain a full-time employee -- said that the two executives are still "highly aligned" strategically.

But analysts said that if Schwartz wants to hold on to the CEO job, he will have to give Wall Street what McNealy hasn't been able to deliver since the end of the dot-com boom: consistent profitability.

The CEO change "indicates that the financial market had finally come to the end of [its] patience more than anything," said Charles King, an analyst at Pund-IT Inc. in Hayward, Calif. "The company has had a really tough time over the last three or four years."

King called Schwartz, who is 40, "a conventional choice" for Sun.

"This is a stay-the-course signal," agreed Rob Enderle, an independent analyst in San Jose. "In fact, the real question may be whether there is really any change at all, since the reporting relationships remain very similar."

However, Schwartz said he plans to conduct a "comprehensive review" of all aspects of the company over the next two months, leading into the start of Sun's next fiscal year. "We're going to be making sure we're aligning the organization for growth," he said.

Schwartz emphasized the importance of research and development, on which Sun spends about $2 billion annually. And regarding the issue of possible workforce cuts, the new CEO said the purpose of the planned review is "not to figure out how to take a whack at head count." But he added that Sun will do some "pruning" of operations that aren't yielding returns.

Schwartz announced some immediate changes last week. He said that Greg Papadopoulos, who has been Sun's chief technology officer, will be executive vice president of research and development. Schwartz also said there will be an increased emphasis on executive teamwork; for example, he plans to share an office with Mike Lehman, Sun's chief financial officer.

The choice of Schwartz to replace McNealy was comforting to Lisa Saichompoo, software and systems manager at the University of Nevada, Reno. "I don't think there will be much of an alarm over this change," she said. "It would have been quite the opposite if the new CEO was coming from outside of Sun."

But Saichompoo did have a suggestion for Schwartz: Maintain the company's focus on developing its x64 servers.

Neal Tisdale, another x64 user, said that Sun needs to improve its support for the Opteron-based machines. But he praised Schwartz's promotion to CEO.

"I think it's a great change," said Tisdale, who is vice president of software development at Atlanta-based NewEnergy Associates LLC. "[Schwartz] is dialed into what drives this industry."

Robert McMillan of the IDG News Service contributed to this story.

Copyright © 2006 IDG Communications, Inc.

  
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