Ex-CEO's better as pitchman

Sun Microsystems chairman helps turn around ailing server maker by selling to big clients

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November 02, 2006|By Bloomberg News

SAN FRANCISCO -- Sun Microsystems Inc. founder Scott G. McNealy took on a new role when he quit as chief executive officer in April: corporate pitchman.

His new job may be paying off. Sun, the third-largest U.S. seller of servers that run Web sites and corporate networks, last week reported a 17 percent increase in first-quarter sales.

McNealy, who stepped down after five years of losses, said he has traveled 75,000 miles, visiting a customer a day, since passing the top job to protege Jonathan I. Schwartz. Sun, which dominated during the technology boom in the 1990s, has struggled for clients since then as companies such as Dell Inc. offered cheaper machines.

"During the dot-com era, the Sun rep would call and the customer would say, `Come in. I want to talk to you.' Now they say, `I don't even want to see you,'" said McNealy, who was clad in his usual jeans and sneakers during an interview at Sun's campus in East Menlo Park, Calif. "It takes somebody like me to go get in, which they do as a courtesy, and then we lay it on."

McNealy, 51, who remains as Sun's chairman, has new products to pitch. Sun spent the past year buying companies, adding technology and reviving a product line that McNealy says lagged behind those of rivals. Schwartz meantime is cutting 5,000 jobs and closing offices.

Sun posted the biggest sales gain among server makers in the past two quarters and vaulted over Dell to retake the third-place ranking it lost last year, according to research firm IDC of Framingham, Mass.

The company's shares have gained 11 percent since McNealy handed the top job to the 41-year-old Schwartz. The Standard & Poor's Information Technology Index has gained 1.4 percent in that period. Shares closed yesterday at $5.31, down 12 cents.

Known for his cockiness and jibes about competitors - he called the Securities and Exchange Commission "wacko" and Microsoft's Windows a "hairball" - McNealy is better suited to spokesman than CEO, analysts said.

"His weakness as a CEO is that he was stuck in a business model that he was invested in," said Michael Cohen, research director at Pacific American Securities of San Diego, who personally owns Sun shares. "The market changed."

Steven Milunovich, an analyst at Merrill Lynch & Co. Inc., became so concerned about McNealy that he told investors in 2003 that the CEO was steering Sun toward "a ravine filled with carcasses." He said McNealy's "brash and contrarian" personality was getting in the way.

McNealy's new position makes sense, said L. John Doerr, one of the earliest Sun investors and a director.

"He is the very best at consultative selling: cultivate a relationship, understand and solve a problem, earn and win the business," said Doerr, a partner at venture capital firm Kleiner, Perkins, Caufield & Byers in Menlo Park, Calif. "The role makes enormous sense."

To keep momentum, global sales chief Donald C. Grantham has put together a list of the top 53 customers for McNealy to pitch, including AT&T Inc. and General Electric Co.

"We have a lot of faith in Sun's product set and strategy, and we're certainly putting effort and money into this relationship, more than we have in the past," said Don Rippert, chief technology officer of Accenture Ltd., after the consulting firm expanded its partnership Sept. 13 to develop technology with Sun. "Their message is definitely getting clearly through to customers."

So far, McNealy said, he's happy not to have the job of "CEO Pinata."

At a developers conference in May, he offered a list of the "Top 10 Best Things About Not Being CEO." They included "I don't have to apologize for stuff I say to Wall Street" and "I have someone to blame."

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