Update: McNealy steps aside as CEO of Sun

Jonathan Schwartz has been the heir apparent of Scott McNealy's at Sun Microsystems Inc. for some time, but many had doubts when he took over as president and chief operating officer of the struggling vendor in 2004 that he was the right man for the job.

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"A couple of years back people said, 'Oh, he's a flash in the pan -- he won't do well reorganizing and managing the company through tough times'," said Laura Koetzle, vice president and research director for Forrester Research Inc.

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But in the two years since he ascended to the upper ranks of Sun, Schwartz has shown real mettle at kick-starting a turnaround with bold strategic moves and layoffs McNealy had long avoided that helped the company trim fat and cut costs, analysts said. Even if Sun is never again the technology giant it was during the heyday of the dot-com boom, it's likely to remain influential and to regain some of its old swagger and profitability under Schwartz, they said.

"I'm impressed, not just by his clarity of vision and general executive sharpness, but he has proven he can deal with tough situations managerially," Koetzle said.

Even so, all eyes and an ocean's worth of pressure will be on Schwartz to continue that kind of leadership now that he is chief executive officer as well as president at Sun, a move that was announced Monday. Sun cofounder and long-time helmsman McNealy will remain as chairman and take on a new position as chairman of Sun Federal, which serves government customers. Sun has no plans to fill the vacated COO position, according to spokeswoman Stephanie Von Allmen.

Many feel it's been Schwartz, not McNealy, who has been steering the ship through some of Sun's boldest moves in recent years. In addition to personnel cuts, they include product maneuvers such as open sourcing Solaris as the proprietary OS bowed to competitive heat from Linux, and creating a new per-user pricing structure for its Java Enterprise System software suite when competitors like IBM Corp. and BEA Systems Inc. trumped Sun in the Java software market.

At the same time, Schwartz also ensured Sun kept the portfolio of its core business -- hardware -- fresh and innovative. Under Schwartz's tenure as president and COO, the company invested in dual-core Opteron processors from Advanced Micro Devices Inc. to fill out its low-end product line, which was lacking for many years, as well as ensured Sun was ready to provide infrastructure for the growing crop of Web-based applications with its next-generation line of Niagra multithreaded processors.

"He's been calling a lot of the plays over the last couple of years," Jonathan Eunice, an Illuminata analyst, said of Schwartz. "This is his architecture, this is his strategy that Sun is playing. He has really put a lot of energy and new thinking into Sun."

"Succeed or fail, the new stuff Sun is trying, from becoming the world's biggest Opteron reseller, to Open Solaris, to the pricing they've done with the Enterprise Java System, is having an effect on the industry as a whole," Koetzle said. "They're forcing the industry to make changes it doesn’t want to make that are good for customers, and I applaud their bravery."

McNealy praised Schwartz's bravery in comments he made Monday after the management changes were announced

"We've got a great guy here -- a guy I've been trying to get into this role for quite a while now," McNealy said. "He and I can finish each other's sentences. We're very aligned strategically ... and he's got something that's very rare, and that's courage."