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Instant Insight |
May
1, 2002
Sun Microsystems Announces Leadership Changes and New
Organizations
Today Sun Microsystems announced the departure of
President and Chief Operating Officer, Ed Zander, effective July 1, 2002. Zander’s
full time responsibilities will be handed over to Scott McNealy, who is
currently Chairman and Chief Executive Officer of Sun.
In addition, Sun previously announced three other
executives are retiring on the same day. The three retiring executives and
their replacements are:
¨
Mike
Lehman, Executive Vice President of Corporate Resources, Chief Financial
Officer, and Corporate Executive Officer,
o Replaced by Steve
McGowan, former Vice President of Finance, Planning, and Administration for
Global Sales Operations;
¨
Larry
Hambly, Executive Vice President of Enterprise Services,
o Replaced by Patricia
Sueltz, former Executive Vice President of Software Systems Group;
¨
John
Shoemaker, Executive Vice President of Computer Systems,
o Replaced by three of his
former direct reports who are now Executive Vice Presidents: Clark Masters for
Enterprise and Vertical Systems, Neil Knox for Edge Computing and Horizontal
Systems, and David Yen for Processor Products Group.
Sun has also recently launched two new business units within the company. The first is a unified software organization, bringing together Sun’s software and software products, including Solaris, Java, and the Sun ONE products. Executive Vice President Jonathan Schwartz, who is currently Sun’s Chief Strategy Officer, will lead this group. The other group is a marketing and business development organization, which will be run by Executive Vice President Mark Tolliver, currently Executive Vice President and President of iPlanet.
Net/Net
It’s the season: Sun has a yearly tradition of realigning
its management team in the April timeframe. They usually do this as part of the
annual planning for the next fiscal year, which begins on the first of July. For
industry analysts, these announcements are as much a part of springtime as
robins and crocuses. However, this year was a bit of a surprise because it
covers a significant portion of Sun’s executive management and has been
delivered in bits and pieces over the last month with the culmination today of
the announcement regarding Zander.
In a conference call, McNealy and Zander portrayed the
events as having been planned over the last two years. McNealy stressed that
all of the change was part of an ongoing succession plan Sun has created over
the last several years, and that there is no hidden meaning behind these
announcements. In fact, the retirements are all very friendly, with many of the
departing executives lingering until September or year-end to assist with the
transition. On the other hand, one
cannot help but wonder about possible deeper meanings when so many key
executives depart at the same time.
Perhaps most surprising is McNealy’s announcement that
there is no immediate replacement for Zander. For all his talk of extensive
succession plans, one would think that the President and COO should be the
number one focus of those plans. The fact that he cannot or will not name one
makes one wonder what all those succession plans are for, if not for the head
of the company. At the same time, the McNealy-Zander relationship is singular. Ed
“Armani” Zander, the serious New York businessman, has been a perfect foil to
McNealy’s Detroit bad boy, who is better known for shocking one-liners about
the competition, most notably Microsoft. It will take time to find another executive who can complement
McNealy and drive the company to the next level, managing multiple direct
reports, representing Sun to key customers, and managing the dogged financial
analyst community.
One must also consider Sun’s position. While there is
rumor that Sun could return to profitability in the next quarter or two
(leading statements and economic rollercoasters aside), from a market
perspective it is clear that Sun is gearing up for the next phase of the ongoing
market domination war. Although McNealy
likes to position Sun squarely as a systems company, company executives will
admit that they face a two-front war with IBM on one side and Microsoft on the
other. In addition to rolling out ever faster, bigger, and more robust
hardware, Sun has Java to consider, is evolving operating environment
capabilities, and is uniting its disparate software bits under the more
cohesive Sun ONE umbrella. The organizational changes are the easy part. Getting
the strategy right is tougher, although McNealy’s consistent vision of a big
freaking Web tone switch continues to work for them. But it may have to work
harder. The road to get there from here is not at all clear for anyone in the
industry, and Sun does not have a lot of wiggle room for error right now, as
IBM continues to develop a solid product portfolio and HP/Compaq have finally
been released from their eight-month stasis and once again will have the
opportunity to have significant impact on the market.
McNealy will need to put his money where his mouth is and
demonstrate that his new team really has the energy, vision, and drive needed
to get the company to the head of the pack again. He needs to solidify the new
team and finish the latest round of squabbling over which road to take. The new
software team, headed by Jonathan Schwarz, will be particularly important to
the business as Web services and data center virtualization models evolve into
reality. Many of the necessary
components will come from software innovation. We believe it is no accident
that Schwarz has been placed in this role. He has been trained in the business
background for the last few years. He has been responsible for long-range
planning and development functions, mergers and acquisitions, venture and
strategic investments, and strategic relationships. He has run product groups
and is now in charge of arguably the most pivotal group at Sun. As the wagering
begins in boardrooms, bars, and stock markets for the replacement for Zander,
from our perspective Schwartz is looking like the odds-on favorite.
The
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