Farewell, Scott

Yesterday, Scott McNealy stepped down as CEO of Sun Microsystems (Nasdaq: SUNW  ) . Company president Jonathan Schwartz will take his place. Except that he can't. McNealy was and still is uniquely irrepressible, which is why I like him so much.

That was even true when I was a barely competent member of Sun's PR team in the late '90s. I remember fidgeting my way through an orientation at one of Sun's Silicon Valley-area campuses, waiting for my turn to introduce myself. Finally, when the leader reached the back of the room where I was seated, I nervously rose. When asked why I had joined Sun, my response was typical. "To stick it to Microsoft (Nasdaq: MSFT  ) ," I said.

And we did. Well, sort of. Others did; I mostly watched in awe as partner after partner jumped on the Java bandwagon, which in turn led to huge spikes in server sales. But those sales eventually dried up, and it's as if McNealy has become a dot-com dinosaur, a relic of an ancient age in the surreal life of Silicon Valley. It might even seem to be more so this morning, the day after Sun reported Q3 earnings that can only be described as miserable.

Sun lost $0.06 on sales of $3.18 billion during the quarter, failing to meet Street expectations. The loss included a number of charges, including stock-based compensation and restructuring. But even without those bugaboos, Sun still lost a penny.

Even worse is that the company may be about to choke on inventory. Consider: Q3 inventory rose a breathtaking 48% versus last year. That was worse than an already-miserable Q2, in which a buildup of server components didn't match demand, leading to a 28% spike in inventory. (Welcome to the executive suite, Mr. Schwartz.)

And yet, despite these seemingly ugly numbers, investors are cheering today as the stock trades higher by more than 1%. Apparently, they're glad to see McNealy leave the top post. Well, I'm not. After all, this is the same guy who, despite years of catcalls, managed to get $1.6 billion from Microsoft in a legal settlement after years of open warfare. And what about when detractors thought UNIX was dying a slow death? All McNealy did was get his team to build a better Solaris and marketed the you-know-what out of it. Solaris remains today a very popular choice as a UNIX-based network operating system.

My objections aside, the time has probably come for new leadership at Sun. But there's a risk in this transition. Here's why: Few in the business have ever done combat in the tech world like McNealy. As CEO he was rarely graceful, never politically correct, and sometimes very, very wrong. But he was also frequently right. And his vision helped define the networked world in which we now live. Sun needs McNealy's willingness to do battle now as much as it ever has. I hope the new team doesn't lose sight of that.

And Scott? Thanks for the memories.

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Fool contributorTim Beyersworked at Sun when it was the dot in dot-com. Tim didn't own stock in any of the companies listed in this story at the time of publication. You can find out which stocks he owns by checking Tim's Foolprofile. The Motley Fool has an ironcladdisclosure policy.


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