Sun CEO McNealy Steps Down

Scott McNealy, chief executive and co-founder of Sun Microsystems, stepped down on Monday and was replaced by President and Chief Operating Officer Jonathan Schwartz, the company said.

The board of directors said naming Schwartz, 40, as CEO marked "the culmination of a carefully architected succession plan." McNealy, 51, would continue as chairman and also take on the title of chairman of Sun Federal Inc., where he will focus on Sun's U.S. government customers.

"Sun has been a labor of love for me," McNealy said. "We've helped shape the industry as it is today and the opportunities before us are immense. I look forward to a smooth transition and to working with Jonathan on company strategy in my continued role as chairman."

The announcement came on the same day Sun reported a wider loss for the third quarter ended March 26, due to recent acquisitions. Losses soared to $217 million for the quarter, compared with $28 million during the same period a year ago. Revenues for the third quarter, however, rose 21 percent to $3.2 billion from $2.6 billion a year ago.

McNealy founded Sun nearly 25 years ago with Andy Bechtolsheim, Bill Joy, and Vinod Khosla. McNealy has served as CEO since 1984.

Schwartz joined the company in 1996, after Sun bought Lighthouse Design where Schwartz served as chief executive. Judging by his career with Sun, it appears Schwartz was being groomed as McNealy's successor.

In the last 10 years, Schwartz held five major jobs within Sun, learning the business from labs and product development to marketing and corporate finance and operations. He was named president and COO two years ago.

McNealy credits Schwartz with building the computer company's most competitive product line, securing key acquisitions, including Waveset, SeeBeyond, and StorageTek; and forging major partner relationships with companies like Microsoft Corp., Oracle Corp., and Google Inc.

Nevertheless, it's unlikely Schwartz would ever reach the star power of McNealy, whose wit and sharp attacks on rival Microsoft entertained attendees of many industry tradeshows. Among McNealy's trademarks was a top 10 list that usually poked fun of the software giant and its co-founder Bill Gates.