The Return of Scott McNealy?

Posted by: Peter Burrows on April 06, 2009

I’ve wondered more than a few times in recent months how former Sun CEO and current chairman Scott McNealy has managed to stay so quiet since handing the reins to Jonathan Schwartz a few years back. A list of speaking engagements on his blog shows he last keynoted last May. After all, McNealy can’t get much better at golf. It’s not like him to stay so silent. And I must say, having covered the computer business for twenty years, it hasn’t felt right to me, either. Or as entertaining.

mcnealy cover image.gif

Now, there’s a chance “Scooter” may again take center stage. If reports from last night are true, McNealy led the faction that rejected IBM’s bid based on a slightly lower price and some terms and conditions these directors found worrisome. Here’s an interesting post from Miko Matsumura, an executive for Software AG, on the topic. He figures that if IBM doesn’t buy Sun, Schwartz will soon be replaced by McNealy as CEO.

I e-mailed McNealy, but he would not comment on “rumors, no matter how accurate or silly.” But if accurate, the plot of this soap opera will certainly thicken.

I’ve always been a fan of McNealy, given the passion and loyalty he engenders from employees, the corps of great executives who cite him as mentor (he counts more than 150 that went on to be CEO outside of Sun), and his hard-headed refusal to let Wall Street number-crunchers unduly influence his long-term strategy and commitment to R&D. And vision-wise, the guy was as spot-on as anyone. He was talking about a future in which a relatively small number of “big friggin webtone switches” would do much of the world’s computing. That’s exactly what’s happening today, via the huge data centers of Google, Microsoft and others.

But if McNealy does want to pull a Michael Dell and return as CEO, Sun will also have a huge boardroom controversy to deal with along with its many other problems. While Sun’s board was criticized for years as a rubber-stamp for McNealy, many directors were glad to see him go when he stepped down in 2006. Since then, Schwartz—his hand-picked successor, and a loyal protege himself—has moved decisively to do things McNealy refused to do, particularly to cut costs and jobs in response to falling sales and margins.

Indeed, many of my sources would have preferred McNealy had left the board altogether. Conventional corporate governance wisdom says that it’s impossible for a successor—particularly a hand-picked one—to have full authority with such a powerful personage in the wings.

McNealy professed to be highly sensitive on this score, in this 2007 story I did on Schwartz. He told me that “I didn’t want to leave the company entirely, but I was absolutely willing to leave. I said if you want me to go, I’ll go.” Here’s more on the topic from a companion piece that ran at the time:

By late 2005, Schwartz was anxious to make the jump to the corner office. McNealy says he delayed to let Sun’s business and product line improve to ensure a smooth transition. “He wasn’t sure whether I was trying to lead him on,” recalls McNealy. “I told him, ‘Relax, you’re extremely hirable.’”

When the transition came in April, 2006, Schwartz insisted that McNealy not only stay away from staff meetings, but that he stay out of annual leadership meetings of top managers and that he not have a formal role in setting strategy. “As difficult as it was for Scott, he pretty much threw me the keys and said call me when you need me,” Schwartz says. “And I know that had to be really, really painful for him.”

Also problematic for Schwartz was McNealy’s penchant for headline-grabbing barbs against Sun’s competitors. In his first week as CEO, Schwartz called Hewlett-Packard (HPQ) CEO Mark Hurd, IBM (IBM) CEO Sam Palmisano, Dell (DELL) Chairman Michael Dell, and others to offer an olive branch and explore ways to work together. On occasion, Schwartz also read McNealy the riot act for bad-mouthing a company with which Sun was negotiating, sources say. “I reverted once in a while to my core DNA, but he hauls me aside and tells me when I’m not being helpful,” McNealy says. “Even if he’s wrong, he’s right—because he’s the boss.”

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Reader Comments

Ex-Sun Employee

April 6, 2009 02:13 PM

McNealy is less like a Michael Dell, and more like a Steve Jobs. Many Sun devotees, both internal and external, would love to see Schwartz go and McNealy return. Hell, if the IBM Deal collapases, McNealy could almost buy the company back with the cash in his back pocket, take it Private, and then do whatever he needs to. If he's right, and he's been right before, Sun would then re-float in 5 years time and he'd never need to work again (not that he has to now)

anonymous coward

April 6, 2009 04:17 PM

I don't think the company looks more cool by having a pony-tailed CEO. Even Steve Jobs has no pony tail. Fire Schwartz, sell to IBM for whatever they would like to pay.

Raayee

April 6, 2009 05:51 PM

You know guys, do a little research and find out that McNealy does not have the best business sense. Sun started going in a sprial during the tenure of Mr. McNealy and Schwartz just could not bring it back. Also, remember, Dell did not return his company to the #1 spot yet so do not bank on McNealy's abilities to do that either.

If McNealy comes back as CEO, he would terminate deals with Microsoft and Intel and wrap Sun back to the old mentality of going nowhere. Sun needs the likes of Mark Hurd..

me

April 6, 2009 07:49 PM

Not sure about McNealy, but forcing the pony tailed idiot out the door would be the best move. Ever. Period. Better by far than Java, Solaris, Sparc, etc...

FAN of SUN

April 7, 2009 04:00 AM

Sun needs to understand what finance is all about. Sun has got some fantastic technology products. Sun needs some great FMCG and finance understanding Leader with skill to monetize from the products. Don't be surprised if the sales force position the products well and being a Technology oriented products sun could be giving IBM a RUN in the next 5 years...
Sun Never sets, its the Earth which revolves around SUN.

UX-admin

April 7, 2009 10:18 AM

"Also, remember, Dell did not return his company to the #1 spot yet so do not bank on McNealy's abilities to do that either."

Except that Michael Dell is a greedy average-intelligence chum, and Scott is truly an industry titan and a seer.

Putin told Michael Dell how things work, and although I can't stand him, it was one thing that made me truly happy; someone needed to tell the "Neanderthal for Texas" just how neanderthal he was when he tried to pitch a deal of DELL garbage to Putin.

The ex-Sun employee's idea is really good, McNealy should just buy Sun and turn it private.

Just like Steve Jobs kicking out that Coca-Cola idiot and turning the company around, Scott has the experience, the willpower and the vision to make Sun shine again.

UX-admin

April 7, 2009 10:21 AM

"Also, remember, Dell did not return his company to the #1 spot yet so do not bank on McNealy's abilities to do that either."

Except that Michael Dell is a greedy average-intelligence chum, and Scott is truly an industry titan and a seer.

Putin told Michael Dell how things work, and although I can't stand him, it was one thing that made me truly happy; someone needed to tell the "Neanderthal from Texas" just how Neanderthal he was when he tried to pitch a deal of DELL garbage to Putin.

The ex-Sun employee's idea is really good, McNealy should just buy Sun and turn it private.

Just like Steve Jobs kicking out that Coca-Cola idiot and turning the company around, Scott has the experience, the willpower and the vision to make Sun shine again.

John Bailo

April 7, 2009 01:33 PM

Sun is positioned for the 21st century. It's worth many multiples of what it is now. The IBM buy was a rip...investors need to hold shares and ramp this bird up the staircase.

codehalo

April 7, 2009 04:26 PM

@UX-Admin,

the coca-cola idiot was long gone when steve returned. Actually, the coca-cola idiot was the one who did the kicking out. Ed Zander was the moron who destroyed sun, just as he did to motorola.

MBA's know NOTHING about technology and how to sell it. Morons.

T

April 7, 2009 07:50 PM

Sun's academic approach to corporate structure has caused it to outlive its usefulness in the marketplace. How will the return of a conceited, pompous leader solve that problem?

Nuke'm

April 9, 2009 08:17 PM

I have a question for those of you that think it would be a good idea for Sun to just go away. Which of the top 3 left standing (HP, Dell, IBM)is known for innovation?

HP gave up on that when they moved away from PA-RISC and HP-UX (yes it is near death). They are nothing more than an integrator now.

Dell, they have always been an integrator. Nothing more.

IBM has always let someone else take the arrows first before coming out with their own products.

Sun, as I see it, is about the only one that innovates and keeps the industry honest.

Personally, I think the media and analysts need to look at more than the financial value of a company

James Jeffries

April 16, 2009 05:48 PM

Look, it's over for Sun. It's not about personailities either. Look at Bill Gates, many, many people hate him and people still buy his software.
Years ago, people used to buy Sun and they were willing to pay tens of thousands if not hundreds of thousands of dollars for what you can get today for under $1000. They used to make super fast cpu but then Intel outpaced them. They used to have a great OS, then Linux replaced it. Game over. It used to be a great company, it will be lucky to survive.

S

April 17, 2009 03:20 AM

All, please do not comment so much on rumours, speculation in the market. It won't help a great company like Sun.
Sun is fully committed to continue to be a company as ethical, as innovative as it can be.

They have even put action to curb the rumours by launching more innovative product, the most recent of all is the
"Open Network Systems" launch http://www.sun.com/launch/2009-0414/index.jsp

Sun has curb the rumours to show its commitment into the future with clear actions, not just talk only.

Kevin

April 17, 2009 11:54 PM

I hope that egotistical jerk does become CEO again. The fact that Mr. Dot-Com McNealy couldn't put the competition disparaging sound bites out fast enough certainly played a role in the commitment made by an IBM Senior Executive to take back the Unix Market. Let the Mouth take the helm while the ship goes down.

As for those folks who feel that IBM lacks in innovation: IBM has lead all companies in patent files for the last 16 years in a row.

Mr Moose

April 29, 2009 02:17 AM

Working for Sun for several of the early year we all admired Scott a great deal. He is a great leader that made working fun. We had a lot of fun kicking HP and IBMs ass in the 80s and early 90s.

Don't compare Scott to Dell. Dell assembled boxes at commodity prices, Scott charged Enterprise Computing for the better.

I hope Scott's best days are ahead of him. He will create a great deal of excitement in what ever he does.

Mr Reality

July 30, 2009 12:33 AM

Pony tail drove the company into the ground. He's pathetic. Scooter is no Jobs... just a hack golfer. Both are sell outs as human beings. Larry... it's in your court.

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BusinessWeek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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