Sun tussles with startup over noted systems designer

Sun hasn't had much good news to report lately, so it wasn't surprising that it went into spin mode Thursday after startup company Arista Networks announced that it had snared Andreas Bechtolsheim, Sun's chief scientist and a highly regarded systems designer, to be its chief development officer.

The announcement led to a flurry of reports that Bechtolsheim had resigned from Sun, something the systems and software company strongly denied. It blasted an e-mail to reporters Thursday morning, calling the reports inaccurate and saying that Bechtolsheim will "continue his present involvement" with Sun, albeit on a part-time basis.

That sparked a brief tug-of-war between the companies. Mark Foss, Arista's director of marketing, said in response to Sun's e-mail that "as far as we're concerned" Bechtolsheim is working full time for Arista. "There's a miscommunication between Sun and us," he said. "We're working with Sun at the moment to clarify the situation."

Bechtolsheim has now clarified it. In an interview Thursday he confirmed that he works full time at Arista, where he is also chairman and cofounder, but that he'll continue to advise Sun on a part-time basis. "That's the legal status," he said, adding that he'll work for Sun "no more than one day a week."

"Sun has a very busy product schedule ahead of itself," Bechtolsheim said. "The products for the next year, if not the next two years, are all laid out. There are sometimes questions that come up that they'd like to call me back on or ask me about, and I'm happy to help them out on that basis."

"This may change in the future," he added, "but for now I'm still going to help Sun out on a part-time basis."

Bechtolsheim said he was moving to the networking startup because there's little room left for innovation with industry-standard servers, which is what he worked on at Sun.

"I'm really driven by the opportunity to innovate, and quite frankly the server business is getting more mature," he said. "It's basically difficult to add value to industry-standard servers built around Intel and AMD CPU chips, whereas the networking space has a lot of opportunities remaining in terms of the ability to innovate."

Sun has had enough bad news this week already, which could explain attempts to play down the departure of Bechtolsheim, who is also one of its founders. On Monday, Sun warned it would report a big loss for the past quarter on declining revenue, which sent its already-flagging stock price lower. Then on Wednesday, Sun's largest shareholder said it would take a more active role in the company to help maximize shareholder value.

The shareholder, Southeastern Asset Management, hasn't said yet what it plans to do. Dan Olds, principal analyst at Gabriel Consulting Group, said possibilities include trying to sell off some hardware assets, making changes in senior management, or making Sun a private company, which would relieve pressure to meet quarterly earnings forecasts.