New CEO could sharpen Sun's focus

Sun Microsystems CEO Scott McNealy’s decision last week to step aside after two decades at the helm of the legendary Silicon Valley company could throw open the doors to rapid change at the company, as new CEO Jonathan Schwartz focuses Sun’s resources on technologies that may pull it out of its prolonged slump.

Schwartz is a Sun insider with deep knowledge of the company, but with few of McNealy’s prejudices and preoccupations. As CEO, he will need to continue the course on low cost servers and open source that he and McNealy had set in recent years, while sharpening the company’s strategy in areas such as storage and identity management, according to interviews with analysts and Sun customers.

McNealy confirmed widespread rumors on April 24, saying that he would step aside as CEO. He is staying on as chairman of the company he co-founded in 1982 and will focus on Sun’s business in the government and academic sectors, as well as on enhancing Sun’s partner relationships.

The combative McNealy has been the public face of Sun since its inception. Schwartz has been McNealy’s right-hand man in recent years, however, steering Sun in new directions. That background will smooth a transition that could have been rocky, experts agree.

“McNealy has been running all of the plays Schwartz has suggested for over two years, so it’s not as though it’s a new regime and a new time,” said Jonathan Eunice, an analyst at Illuminata.

In fact, Schwartz’s elevation to the top job at Sun could prompt a renaissance of sorts at the Santa Clara, Calif., company, as ideas that were surefire losers with McNealy get a new look.

“Old ruts are no longer in effect. Schwartz is less beholden to ideas and structures that were built up in Sun over the years,” Eunice said.

Sun was hit hard in the dot-com bust when enterprise buyers turned away from its expensive, proprietary boxes to lower-cost commodity hardware running Linux. McNealy’s skepticism about Linux- and Intel x86-based servers is one reason Sun hasn’t been able to pull itself up after the dust cleared, said Charles King, an analyst at Pund-IT, in Hayward, Calif.

Sun customers interviewed by InfoWorld welcomed the prospect of change at the company, and were pleased with the smooth leadership transition.

“It’s clear Mr. Schwartz has some different ideas, and Sun could use some new thoughts, new blood,” said Timothy Murphy, executive vice president and COO for the Research Foundation of State University of New York, which is using Sun hardware, software, and services.

It is not clear, however, how changes at the top will play out for enterprise IT buyers.

Sun should invest more in its identity management, UltraSparc and Opteron-based server businesses, and hone its message in the storage market, said Laura Koetzle, an analyst at Forrester Research.

Some Sun-watchers doubted whether an insider like Schwartz can give the company the rejuvenating shot it needs to become profitable again, although Schwartz’s role promoting the shift to Linux on Sun’s hardware is a good sign.

“Sun’s challenge is not on the hardware side ... it’s really on the software side, where Linux has risen as an alternative to Solaris,” said Zach Nelson, CEO of NetSuite in San Mateo, Calif.

But with Sun about to refresh its UltraSparc servers as well as Opteron-based “Galaxy” x86 servers, and knee deep in development of a next-generation RISC chip, code-named “Rock,” radical change may not be called for right away, King said.

“The die has been cast. They need somebody to keep the company on track ... But they also need somebody who can lead the company back into financial viability very quickly. I wouldn’t want his job for the world right now,” King said.