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How Sun Became the Scottie and Eddie Show Founder and CEO McNealy has a near-perfect match in his president, Ed Zander, who keeps Sun humming why McNealy spins strategy Given all the CEO positions Ed Zander has been considered for -- from mighty Hewlett-Packard to tiny Chipshot.com -- many computer industry insiders wonder why he's still playing second fiddle as president to Sun Microsystems CEO Scott G. McNealy. But then, those people don't know the depth of the surprising partnership between these two outspoken executives. Their relationship goes back to Sun's first days in 1982, when the startup was having trouble taking business away from archrival Apollo Computer Systems. When McNealy asked Sun sales chief Joe Roebuck why, the answer was simple. "The reason we weren't winning was because of Zander," who was then head of marketing for Apollo, says Roebuck. "I told Scott, the best way to beat Apollo was to hire Ed. Easier said then done. Happy in his job and in his adopted home of Massachusetts, Zander blew off McNealy's recruiting calls for five years. "We had to waste Apollo a bit to get him," jokes McNealy. But upon succumbing in 1987, Zander quickly flourished in the confrontational corporate culture McNealy had created. And on New Years Eve, 1990, as Zander was putting on his tux, McNealy called to offer him the job of running Sun's various software efforts. "I COULD KISS HIM." It was just the general management challenge Zander, then typecast as a smooth-talking marketer, was after. He had long harbored a desire to run his own business, even making a hobby of studying rivals' profit-and-loss statements to hone his skills. Still, Zander initially resisted, citing his complete lack of experience in the software business. McNealy refused to take no for an answer. "It's tyical Scott: He just makes up his mind, and then dumps it on you," says Zander. "But now I could kiss him for it." Soon, McNealy would want to return the smooch. With Sun struggling to rise above larger computer rivals like HP and IBM, Zander quickly set out a simple goal: to make Sun's underlying software the most powerful and reliable of the many versions based on the UNIX programming language. He imposed tight controls on engineers to keep them focused on this goal, and even came up with a name: Solaris. By the mid-1990s, the mission was largely accomplished. Solaris is now the favorite choice of the dot.com set and owns one-third of the Unix market. "Sun is winning more because of Solaris than anything else," says former Sun executive Bill Raduchel, who left to become America Online's chief technology officer earlier this year. Zander's software success led McNealy to give him an even bigger job in 1995: running the computer operations that brought in some 80% of company revenues. It was hardly an enviable task. At the time, every one of Sun's rivals had decided to hedge their bets by offering machines based on Microsoft's Windows software. "It was picture-taking time with Mr. Gates," recalls Zander, noting the battle royale between IBM, HP, Compaq and others to buddy up to Microsoft. "Even our own customers were beating us up mercilessly, and there was plenty of controversy inside our team," he admits. It got to the point that Zander created a task force, which spent 90 days considering the option of selling machines based on Windows. "There were nights at 2:00 in the morning when I'd stare at the ceiling and think, this is a tough one -- the deck is just so stacked against us." NEW INFLUENCE. When McNealy made the decision not to pursue a Windows strategy, Zander followed with a barrage of bold decisions that set the stage for Sun's current success. For starters, he ordered the company's engineers to develop a cheap, sub-$5,000, workstation to slice down the PC industry's price advantage. And after discussing the potential of the newly exploding Internet with Chief Technologist Bill Joy and his team, Zander placed big bets that Sun's slogan, "the Network is the Computer," was about to come true. He doubled Sun's investment in Solaris and its Sparc family of microprocessors, and funded Joy's Java project -- software for creating Web programs. In the process, Zander began exerting an influence over McNealy that surprised colleagues. Exhibit A: Upon taking the helm of computer operations in 1995, he convinced McNealy to scrap a decentralized structure called "planets" to focus the company full-bore on the commercial computing market. For years, many Sun insiders felt this scheme fragmented the companies efforts in this direction, but McNealy wouldn't back down. "To get Scott to pay attention, you have to be intellectually bright, have courage in your convictions, and you have to show a proven record of success -- and Ed did all three," says venture capitalist J. Philip Samper, who was Zander's predecessor in the job. The result: "For the first time in eight years, the whole company is rowing in the same direction," says Novell CEO Eric Schmidt. "As a result, Sun is perfectly positioned at the center of the Internet e-commerce world." By late 1998, McNealy tapped Zander to be Sun's day-to-day chief, to free himself to do more speaking and strategizing. Some of Zander's friends warned him it was a no-win proposition, suggesting that McNealy -- like many founders of high-tech companies -- would never relinquish real control. But instead of turf fights, the two executives quickly settled on a division of labor: McNealy would take care of long-term vision, while letting Zander run the company day to day. "Ed's a doing a much better job [at COO] than I could do," says McNealy. "He tends to freak on people when they're not making their numbers. I think I'm a little less feared than he is." "COMFORT AND HONESTY." The opposite may be true when it comes to customers, who often wonder whether the Gates-bashing McNealy is more interested in beating Microsoft than with serving their needs. "Sure, I'll tone down some of Scott's stuff," says Zander. "I agree with him, but I've got to prove to customers that we understand their needs." Says Nicholas J. Earle, head of marketing for Hewlett-Packard's enterprise computing unit: "When you compete with Sun, it's Ed Zander you have to beat. He's the guy customers have the most respect for -- the reasonable face of Sun." That doesn't mean Zander and McNealy don't have real differences of opinion, because they do -- to the point that rumors often swirl about personal animosity between the two. But that's misguided. "Others may see fighting, but maybe it's just comfort and honesty," says Zander's wife, Mona. "There's a tenderness to their relationship underneath it all." Indeed, McNealy relishes Zander's in-your-face style. "I'll ask him a yes-or-no question, and I'll get a one-word answer 99% of the time. How many people will give you that?" Indeed, the freedom to freely argue his views is a major reason he's content with being McNealy's No. 2. "Ed's not afraid to go into Scott's office and push back, and that's one of the reasons Scott is comfortable with him," says former Sun executive Bill Coleman, now CEO of BEA Software. REALITY CHECKER. If Zander likes Sun's combative decision-making style, he also likes McNealy's insistence that everyone rally behind the final decision. Says Zander: "It's good to debate, but then you close it off. You don't disagree and subvert. You agree and commit." Indeed, Zander has fought against new initiatives on multiple occassions -- such as trying to make Sun's Java programming language into an Internet standard. But when Java was ready for market in October, 1995, it was Zander that put together the headline-grabbing events that helped it win mind-share among software developers. More often than not, Zander's role is to keep the more radical-thinking McNealy tied to reality. Zander initially opposed the $73 million purchase of Star Division, which makes a suite of programs that compete with Microsoft's hugely popular Office suite. McNealy wanted to buy the company and then give the software away over the Internet to make sure Microsoft couldn't lock in customers for Windows NT by giving big discounts on Office. "It wasn't that Eddie didn't think it was a good idea, but he couldn't see how it was going to help us make the quarter," says McNealy. But once the decision was made to buy Star Division, "you wouldn't have known it wasn't his idea." Will McNealy be able to keep Zander as his right-hand man? He was concerned enough to ask Sun's board to allocate some of his 1998 stock option bonus to Zander, but he remains confident. "I almost lose Ed once a week," he laughs. "Do I think Eddie could be a great CEO? Yeah. Did I think so five or seven yers ago? No." Others agree. Says Prudential Securities analyst Laura Conigliaro: "I think Ed's less likely to leave now than earlier in his career. O.K., he doesn't have the CEO title. But more and more, Sun is associated with Ed." Peter Burrows covers information technology from Silicon Valley. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ |
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