Sun Microsystems' New Star Needs to Shine

CEO Jonathan Schwartz must give the long-faltering company a clear focus -- and an identity.

What does Sun Microsystems want to be when it grows up? That's the question the company's board of directors is probably asking newly appointed CEO Jonathan Schwartz, who this week replaced cofounder Scott McNealy. The former CEO's mantra of "the network is the computer" fit nicely into the pages of business magazines -- but never quite gave an identity to the company.

Sun Microsystems' new CEO Jonathan Schwartz. (Courtesy of Sun Microsystems.)

While most tech-savvy businesspeople and consumers have heard of the Santa Clara, CA-based firm, few could say what it actually does. Schwartz -- who's held seven positions within Sun since joining the company in 1996, most recently as president and chief operating office -- hopes to rectify that.

Known outside the company for his technical acumen -- as well as a ponytail and outspoken blog (he was one of the first high-level technology executives to start a public blog, in June 2004) -- the 40-year-old Schwartz wasted little time laying out his vision for Sun's future on April 24 during a conference call where he was introduced as the new CEO.

Schwartz expressed enthusiasm for a few specific technologies: open-source operating systems for large corporate computing systems, "grid" or "utility" computing, and the idea of selling computing time and power by the CPU-hour over the Internet. But he failed to bring up two keys areas in Sun's past: semiconductors and microprocessor architecture.

First, though, to the passing of the reins. McNealy, who was CEO for 22 years, emphasized that it was his decision to turn the reins over to Schwartz, and the time was ripe for the handoff, given that Sun's long-uncertain finances are stabilizing. The company has $4.2 billion in cash on hand and racked up revenue growth of 21 percent in the third quarter of its fiscal 2006. Schwartz did little to dispel that notion, saying observers should not expect any drastic changes in Sun's strategy, and minimizing his personal and philosophical differences with McNealy. "We have different haircuts and sports preferences. He drinks Budweiser, I don't," quipped the new CEO.

When it comes to Sun's role in the future of computing, Schwartz's philosophy and strategy differ little from McNealy's. Nonetheless, the protégé said it was time for a comprehensive review of Sun's activities -- which he said will mean "adding areas where we can grow and pruning areas that aren't yielding return."

Schwartz has already launched parallel "comprehensive reviews" of the companies' product line, marketing spending, resource allocation, and financial planning. Although that process is an annual one at Sun, this year's reviews will involve "a little more scrutiny" of areas where the company can grow, Schwartz says.

Asked to say which low-return areas might be pruned to make Sun's focus clearer, the new CEO would not be specific. But he said the company would shy away from "lots and lots of individual products that don't stitch together well." As noted, his list of growth technologies did not include semiconductors or microprocessor architecture -- a big focus for Sun over the last several years, as it has developed new generations of its UltraSparc server chips to compete with similar products from Intel, IBM, and Hewlett-Packard. The latest UltraSparc chips feature multiple processors to increase computing capacity.

Instead, growth will come mainly from the Internet, Schwartz said, which will continue to increase in power and scope spread "for as long as I'm on this earth." The question for Sun, he says, is whether it can take advantage of that growth more effectively than its key competitors. "We're not worried about demand," he said. "We're worried about intercepting that demand."