McNealy gives up CEO title at Sun

Scott McNealy is handing off the reins at Sun, effective immediately, resigning the CEO position he has held for 22 years as the beleaguered computer maker announced another quarter in the red on Monday.

McNealy will retain his position as chairman of the company he cofounded in 1982, but Jonathan Schwartz, currently Sun’s president and COO, will take over as CEO.

What do you think? Discuss McNealy's decision to step down.

The news came as Sun announced yet another net loss. It reported a net loss of $217 million, or 6 cents per share, for the third quarter, compared to a net loss of $28 million, or .01 cents per share, during the same period a year ago. The flagging numbers follow a net loss of $223 million, or 7 cents per share, in the second quarter of this year.

Sun, a high flyer during the dot-com boom, was hit hard when enterprise buyers turned away from its big, proprietary boxes to lower cost systems built on standard, commodity hardware running Linux. Sun recently has bought into the low cost, standards-based systems idea, though it has yet to see a steady profit. It has posted a profit in only a handful of quarters over the past five years.

“I assume Scott will paint it as things are back on track and the company is in good hands, but I think the reality is he would have preferred to have waited until the financial results were really there,” says Gordon Haff, an analyst at Illuminata.

As far as company direction, Haff doubts that customers will see any significant changes.

McNealy “and Jonathan certainly seem to be on the same page, so in handing the CEO title over to Jonathan I wouldn’t expect to see any radical change,” Haff says. “I really don’t see there being a lot of impact on customers.”

While Haff says he’s surprised by the timing of the announcement, the shift itself is to be expected.

“It’s the obvious next step,” says Haff. “I could speculate that from Scott’s perspective, they have set a new direction for the company and set their strategy. They’ve got their cost structures in order and so forth and those are some of the things that Scott has been most focused on.”

“From Scott’s perspective it may well be that he’s kind of done the big things for this next stage of Sun and it’s time for him to step down, though he still remains clearly involved as chairman,” he says.

McNealy will focus his efforts on business in the government and academic sectors, as well as on enhancing Sun partner relationships, Sun said in a statement. In addition, he will be chairman of Sun Federal, which focuses exclusively on U.S. government business.