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Sun's Scott McNealy's Days are Numbered?
alek writes "The Wall Street Journal writes 'Dusk could be near for Sun's McNealy' where they conjecture that the founder and and CEO of Sun Microsystems might be leaving soon. They suggest that the return of former CFO Michael Lehman and and a more active Board pressing for improved performance could result in COO Jonathan Schwartz taking over the top job. We've heard stories like this for years but Scott has hung in there for a long time - his response to the WSJ was 'That rumor is about 22 years old and still chuggin.'"
People always talk of Microsoft vs Google or MSFT vs Sun or MSFT vs Netscape for MSFT vs AOL - but they rarely realize that it's always been Microsoft vs Kleiner Perkins Caufield and Byers where all these companies (Sun, Electronic Arts, AOL, Google, Netscape) are all at heart part of KPCB's portfolio and act more similarily to divisions of microsoft than separate entities.
I know he isnt popular with the /. crowd, but Schwartz -IS- popular with the Fortune500 CEO crowd... I've seen the guy work a room, he comes across very charismatically (way WAY more than McNealy ever has) and the dumb PHB/CxO types seem to really take an interest in what he's saying.
Now, I'm no fanboy of either one, but McNealy is probably better suited to chair thier R&D or something than he is to being CEO these days. Schwartz at least would put a more energetic face on the company and (one could hope) re-vitalize thier core competancies.
Now, I know im dreaming, but maybe of McNealy got out of the top slot, Sun could/would FINALLY ditch thier 4000% margin policy and start selling crap that I (me personally, or the company I work for) could actually afford to buy!
Sun is trading at $5 a share, time to buy? or forgeddaboudit!?
:-)
Now's the time to decide--earnings call is on Monday. There are some credible rumors floating around that this will be the first profitable quarter in years. Sun's really revamped their product line in the last 16 months (AMD, Niagara, etc.) and in their last 10-K they mentioned they were actually having a hard time meeting demand. (Apropos the original story, there's also speculation that this would be an ideal note for McNealy to end his career on.)
If they do end up back in the black, every analyst and his brother will be on CNBC Tuesday morning shouting "Turned the corner!" and I think it would cause some major institutional buyers to jump back in. Unlike the run-up last month which got subsequently iced due to profit taking, the big guys would be in it for the long haul, creating a new support. $5.50 or maybe even $6? I haven't done the math.
And I feel like this possiblity hasn't been fully capitalized in to the current price--I'm really surprised how little talk there is about SUNW on the boards, newswires, or the Street. A lot of people seem to have written it off as a sad relic of the dot-com era. I think they're missing out on two key points: 1) how revolutionary and unique these new UltraSparc T1s are, especially for those serving up huge amounts of online content (ie everyone) or who are worried about energy costs (ie everyone), and 2) how much brand equity "Sun Microsystems" carries among a whole generation of 25+ year old geeks who grew up worshipping that awesome UltraSparc workstation in the server room/lab/etc (like everyone at Google, for one.)
To the extent that it's even possible nowadays, I feel like SUNW has been slipping under the radar for the last couple months.
P.S. I am quite obviously long on this stock, so if course it's in my best interest to convince you of all this
I think there is a world market for maybe five personal web logs.
I worked for Sun for 7 years, some of that time at VP level, so I got to know Scott, and work with/for him. He taught me an important lesson: never, ever, give up. There were at least two occasions when I was sent out to fight "hopeless" battles for Sun against the arrayed masses of competition. He pushed hard to not give up in the face of impossible odds, and we won.
He never gives up.
It's very easy to armchair quarterback what Sun and Scott have been doing this past decade or so. Whenever I find myself wondering why my SUNW shares aren't worth a tenth of what I paid for them, I'm tempted to think of how I could run the company better than Scott. And then I realize that my puny mind can't come up with anything. The company generates cash, employs a lot of people and satisfies a lot of customers. Scott's never been afraid to remake the company (I lived through the transition from technical workstations to commercial servers and that was quite something), but there's only so much that you can do.
I have no clue what's going on inside the company now but, of one thing I'm sure: if Scott does step aside, it's because he thinks that it's the best thing for the company. He's given everything to it for over 20 years, and could easily have taken the "go lie on a beach" path years and years ago.
'how much brand equity "Sun Microsystems" carries among a whole generation of 25+ year old geeks'
Unfortunately, most of that brand equity has been eaten away by half a decade during which you'd rather be compiling on your desktop than on the server, and trying to answer embarrasing questions why the devs get better performance out of their java code on their laptop than on the expensive app server.
You know, five years ago those 25+ yearers would form a queue when machines got decommissioned and handed out. These days you'd have to pay people to take them.