Jonathan Schwartz takes over company helm

Sun sets on Scott McNealy

Sun Microsystems' chief executive Scott McNealy has stepped down. The company's current chief operating officer 40 year-old Jonathan Schwartz will take over his position.

During a conference call, Schwartz stressed that the company won't make any changes in its strategy. He will however make further changes in the company's leadership and continue a review of the company's business lines.

"We will continue to focus in on the core innovations that allow us to differentiate against our core competitors," Schwartz said.

"The one change this year is that we're very much focused on a comprehensive review of growth opportunities. This is not a comprehensive review of shrinking opportunities. We are allocating resources to the areas where we can grow."

As one of the concrete changes, chief technology officer Greg Papadopoulos will change roles, moving from chief technology officer to executive vice president of research and development. In a move that's intended to reflect the importance of R&D, he'll oversee all of Sun's research and development together with Schwartz.

McNealy co-founded the server maker in 1982. He will retain the post of chairman, which he described as a position of chief evangelist that involves a lot of talking to governments and major customers.

Under his leadership, Sun grew into a multi billion dollar server vendor. The company peaked during the dotcom boom, when it profited from companies rushing in orders to take their businesses online.

Sun however struggled to recover after the collapse of the dotcom boom, when IT departments cut back spending and started a trend of switching to Linux servers running on industry standard servers powered by Intel or AMD processors.

The company wasn't ready to make the leadership transformation earlier, McNealy said during the conference call, because the company then was facing rapid changes. He cited product launches, issues with customer satisfaction and legal issues such as the relationship with Microsoft.

"The most important part was that the quality and customer satisfaction stuff got fixed. We are moving out of a mode of fixing and stabilizing and getting back to growth. Now we are moving back into the market place and start gaining significant share and setting the agenda again," McNealy said.

The company in recent years has switched its focus from its proprietary SPARC servers running on Solaris to providing a broad range of offerings, including volume systems powered by AMD chips. The vendor furthermore has made a major push into the software field by releasing the several of its applications under open source licenses and by creating middleware bundles that are sold with support at a per user fee.

Sun's new chief executive has a strong background in software. He joined the company in 1996 as part of the Lighthouse Software acquisition. He's had a total of seven jobs. Most recently he headed up Sun's software business and was promoted to president and chief operating officer in 2004.

The company posted a net loss of $217m over the quarter that ended 26 March , compared to a net loss of $28m in the same period last year. Revenues grew 21 per cent year-over-year to $3.2bn. The sales increase is largely the result of the SeeBeyond and StorageTek acquisitions.