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 Channel Futures

Open Source


Rumor: Sun Setting for Sun’s CEO?

  • Written by The VAR Guy 1
  • July 9, 2008
The VAR Guy picked up the phone and dialed Sun Microsystems Inc.'s investor relations department. When the call went to voicemail, he left this message: "Are the rumors true? Is Sun seeking to replace CEO Jonathan Schwartz?" Here's more on the rumor, and The VAR Guy's depressing reaction to it.

SchwartzThe VAR Guy picked up the phone and dialed Sun Microsystems Inc.’s investor relations department. When the call went to voicemail, he left this message: “Are the rumors true? Is Sun seeking to replace CEO Jonathan Schwartz?” Here’s more on the rumor, and The VAR Guy’s depressing reaction to it.

Trip Chowdhry of Global Equities Research wrote in a newsletter that a “search is probably on to find a new CEO at Sun.” The rumor was picked up today by Barron’s Online. Does that mean current CEO Jonathan Schwartz is about to get the boot? Personally, The VAR Guy hopes not. But professionally, he can understand why Schwartz may be on the ropes.

What’s super-strange about all this is Barron’s didn’t mention whether they called Sun for comment. Heck, even The VAR Guy left a message for Sun investor relations seeking comment. (Update July 10: Sun sent Nine Lives Media Inc. — thevarguy.com’s parent– an email statement indicating that the company had “no comment.”)

Schwartz inherited quite a mess when he was named CEO in April 2006. Sun was a legacy, proprietary hardware company trying to strengthen its hand in software, services and open source. The VAR Guy gave Schwartz rave reviews when he met the CEO at a SugarCRM conference in May 2007. And he was impressed again when Schwartz orchestrated Sun’s $1 billion takeover of MySQL — the fast-growing open source database company.

But Sun’s stock is trading at a 52-week low and is down 50 percent since Schwartz took over, according to Barron’s.

If change is coming, perhaps we should all circle August 1, 2008, on the calendar. That’s when Sun is slated to announce quarterly results — a natural opportunity to update investors regarding corporate leadership.

If Schwartz becomes the fall guy for past mismanagement, let’s hope Schwartz gets lots of credit when MySQL emerges as one of the smartest IT acquisitions of of the decade.

Update July 10: A reader accurately pointed out The VAR Guy’s goof: In the opening sentence of this blog entry, The VAR Guy originally wrote “Schmidt” rather than “Schwartz.” Ouch! Correction made.

Update #2 on July 10: Sun just emailed thevarguy.com and offered “no comment” on the rumor.

Tags: Agents Cloud Service Providers MSPs VARs/SIs Open Source

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15 comments

  1. Avatar IGnatius T Foobar July 10, 2008 @ 1:20 pm
    Reply

    Jonathan Schmidt?

    Who are we replacing here? Eric Schmidt or Jonathan Schwartz?

  2. Avatar Joe Panettieri July 10, 2008 @ 1:39 pm
    Reply

    @Ignatius: Obviously, our resident blogger needs some sleep and a proof reader. Thanks for pointing out a major goof.

    Readers: In the original version of this post, the first sentence read “Schmidt” rather than “Schwartz.” Correction made 7/10.

  3. Avatar Russ July 10, 2008 @ 6:18 pm
    Reply

    Yeah, the guy (Schwartz) is an effeminate little weasel. Good riddance.

  4. Avatar The VAR Guy July 10, 2008 @ 9:42 pm
    Reply

    @Russ: “No comment” issued from Sun. So let’s not say “good riddance” just yet.

  5. Avatar The rumor monger July 11, 2008 @ 12:12 am
    Reply

    Folks…..per some rumblings on the Sun campus today……my brother (longtime veteran at Sun) just called and confirmed he and his marketing team got laid off today…std. package…someone needs to call Sun insiders to find out what is going on. More importantly, there is no newswire anywhere about layoffs occuring today. Can someone get the scoop????

  6. Avatar The rumor monger July 11, 2008 @ 12:13 am
    Reply

    BTW This happened in Mountain View about 2hrs ago…..

  7. Avatar The VAR Guy July 11, 2008 @ 4:04 am
    Reply

    There were rumored layoffs reported by Barron’s and SeekingAlpha.com earlier this week. Sun announces financials August 1. The VAR Guy suspects we’ll see a general release in a few days, and a much more strategic plan announced as part of quarterly results.

  8. Avatar The rumor monger July 11, 2008 @ 10:46 am
    Reply

    “Russ Says:

    July 10th, 2008 at 2:18 pm
    Yeah, the guy (Schwartz) is an effeminate little weasel. Good riddance.”

    Absolutely right. I have no clue how this clown was anointed the CEO of a multibillion dollar company. OK, he came in when Sun was in some serious trouble. However, he has not done anything to recover the slide. Read some of his ramblings on his blog, and you’ll understand why. Do I sense a slight hint of immaturity or what?? Snicker, snicker….
    A number of present and ex-Sun purist employees I know have said from the very beginning: “he just doesn’t get it”.

    In creating ‘value for shareholders’ with the reverse stock split, look where the stock is now. Many people have taken a bath on the stock. They should have been ‘off with his head’ a long time ago…..

  9. Avatar Hoping for new CEO August 1, 2008 @ 2:39 am
    Reply

    VAR Guy,
    I am still trying to understand how you can be a fan of Jonathan Schwartz? His two years as COO and over two years as CEO have marked some of the darkest hours at Sun. His so-called strategy is not working. I have not heard anyone articulate how it would ever work. I have many acquaintances at Sun and they report morale is at an all-time low with a majority looking for new jobs outside of Sun. The lucky ones are the former employees who got RIF’ed or left voluntarily. Investors in Sun (poor souls) have seen their losses mount. Sun was recently trading at a 13-year low. Sun’s financial performance has been the absolute worst amongst peer companies – by a large margin.

    MySQL may sound exciting in Schwartz’s blog postings, but very few observers or analysts can explain how Sun will ever monetize the deal and make a $1 BILLION expenditure generate return on investment. The percentage of MySQL installations that run in Windows and Linux environments is very high. Sun has a very limited success rate outside of Linux. The primary HW platforms in MySQL installations are likely to be Dell, HP and IBM – and NOT Sun.

    The list of Schwartz’s shortcomings – not the least of which is that he has NO previous experience running a large (troubled) company – is lengthy. I will not bore the readers with a comprehensive list. Customers, partners, employees and investors would all be better off with new leadership at Sun – starting with the CEO but continuing well down into the leadership ranks.

  10. Avatar The VAR Guy August 1, 2008 @ 5:13 am
    Reply

    Dear Hoping: Don’t forget that Schwartz didn’t create the current mess at Sun. Scott McNealy and a blind board of directors created the mess by holding on too long to proprietary hardware with a proprietary operating system. It’s IBM in 1992 all over again.

    During the dot-com boom, The VAR Guy was screaming “sell SUNW” while everyone was buying. Now, Schwartz is trying to clean up the mess. Agreed, Sun will need to work harder and faster to monetize MySQL. Server appliances and server bundles with Sun hardware should be much more aggressively promoted.

    And at LinuxWorld Expo next week, Sun better be out in full force describing how its servers coupled with MySQL and third party apps are the ideal platforms for Web 2.0 systems.

    Perhaps The VAR Guy fell for Schwartz’s charm (“not that there’s anything wrong with that”). Is new leadership needed? Perhaps. But let’s not forget who started this mess. McNealy bashed Windows servers and x86 for a decade. Sparc and Solaris were doomed to lose … as Wintel — and then Lintel — gained economies of scale.

  11. Avatar Hoping for new CEO August 20, 2008 @ 1:37 am
    Reply

    VAR Guy,
    I’m curious, did Sun meet your expectations at LinuxWorld Expo? If so, why?

    I can not agree with your “McNealy did it” defense of Schwartz. Schwartz has had over four years to begin cleaning up the mess and many, if not most observers give him failing grades. There is no revenue growth and the modest financial improvements have come primarily thru layoffs and attrition. Sun’s marketing continues to be worst-in-class. Turnover in the sales organization has been rampant. Defections of top engineers continues unabated. Sun has botched most of the acquisitions they did over the post four years under Schwartz’s watch as COO or CEO.

    Part of being a good leader is motivating the troops by convincing them that the mission is worthy, improving the results from you channel and strategic partners, and running a competent business plan that rewards shareholders. Recent surveys of Sun employees and channel partners indicate that there is no such conviction. The multi-year low on the stock price speaks for itself.

    Schwartz may be successful as a blogger and may garner undue attention for being unconventional in his appearance and his devised business strategy, but a successful leader and CEO he is not.

  12. Avatar The VAR Guy August 20, 2008 @ 12:45 pm
    Reply

    @Hoping: You’ve put The VAR Guy on the hot seat. He’s disappointed to admit that Sun hasn’t impressed him in recent weeks. He can’t fully defend Schwartz at this point but he will offer these thoughts…

    1. Lack of Revenue Growth: Alas, Sun’s revenue had to go down — it HAD TO — before it could ever climb again. Proprietary hardware (SPARC) with proprietary software (Solaris) were doomed at some point to suffer from sharp sales declines. Offsetting those declines will take years to correct.

    Again, this really was McNealy’s fault. He drove Sun off that cliff. But The VAR Guy is starting to realize Schwartz needs to move faster to monetize MySQL and other acquisitions, etc.

    2. Employee Turnover: The VAR Guy isn’t aware of the “recent surveys” you mention. Nor does he have a comprehensive list of Sun staff defections. But the one thing a tech company needs is to hang onto its best talent.

    3. Channel Strategy: The VAR Guy would like to see a far more aggressive channel strategy out of Sun. In Sun’s defense, The VAR Guy is an upstart blogger. So perhaps Sun hasn’t taken the appropriate time to hound him with briefings (hint, hint…).

    4. Stock Price: No debate here. The stock price speaks for itself. Until earnings per share rise consistently, the stock is going nowhere. However, that’s not a buy, sell or hold recommendation. It’s just a fact: Raise earnings to raise the share price… …

    So, The VAR Guy is backtracking quite a bit. Once a Schwartz proponent, our blogger is starting to wonder what it will take to get Sun back on track.

  13. Avatar The VAR Guy August 20, 2008 @ 1:04 pm
    Reply

    @Hoping: Oh, and here’s an ironic twist. Within 10 minutes of posting comment #12, The VAR Guy received a note from Sun’s PR folks announcing some partner program enhancements. Pure coincidence, of course. But good to hear from Sun, nonetheless. Details about Sun’s moves on TheVARguy.com later today.

  14. Avatar Rob Enderle January 26, 2009 @ 10:28 pm
    Reply

    McNealy Goes to Washington: Will Unfortunate Controversy Follow?…

    Mr. McNealy is evidently going to Washington, and God save them and us. Scott McNealy made and nearly destroyed Sun Microsystems. A smart guy who often seemed to enjoy making fun of his competitors more than he did actually getting his own house….

  15. Avatar Dave February 3, 2009 @ 6:13 pm
    Reply

    All the good people in the company outside of propoetary hardware and Solaris OS development are now with Google ( called the Sun software campus internally ), Oracle, or SV startups.

    Aquisition after acquisition ( Blue Cube, IPlanet, Kiva, SeeBeyond, StorageTek ) whither on the vine until all assets are completely written off. MySQL is just the next one on the list.

    Their partner strategy consists of a drive by sale and leaving the partner on their own to pick the next HW platform for future projects ( often not Sun ).

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