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Sun CEO Apologizes to SEC Chief for Calling Agency 'Wacko'

Scott McNealy's remark came during a speech in which he criticized new accounting rules.

October 07, 2003|From Bloomberg News

Sun Microsystems Inc. Chief Executive Scott McNealy apologized to the chairman of the Securities and Exchange Commission on Monday for remarks that included calling the regulatory agency's actions "absolutely wacko."

In a letter to SEC Chairman William H. Donaldson, McNealy expressed his "sincerest apologies" for his "imprudent remarks" made Wednesday in Toronto. In the speech, McNealy also called last year's Sarbanes-Oxley corporate governance law a "disaster."

The co-founder, CEO and chairman of the Santa Clara, Calif.-based server computer maker often uses speeches to castigate competitors and government officials.

One investor said McNealy should focus more on his own annual sales, which have fallen for two years, and how he planned to regain business lost to Dell Inc., International Business Machines Corp. and other rivals.

"Instead of coming right out and saying, 'Our business isn't doing as well as we thought,' they're coming out with statements about accounting laws being crazy," said Sonya Thadhani, who helps manage $1.3 billion at Bailard, Biehl & Kaiser, which holds Sun shares. "It's not very presidential."

Andrew Lark, Sun's vice president of communications, declined to comment on McNealy's letter. Laura Cox, Donaldson's spokeswoman, said the SEC chairman had the letter but would not comment.

In the Toronto speech, broadcast on cable TV, the 48-year-old McNealy criticized the SEC over the growing complexity of financial accounting requirements. In his criticism he included the Financial Accounting Standards Board, the accounting rule maker that dictates how companies report financial results to investors and to the SEC.

"The FASB, SEC and accountants have gone absolutely wacko on us," McNealy said. "I'm a Stanford MBA. I can't read annual corporate income statements and SEC filings anymore. They are absolutely undecipherable."

He went on to compare Federal Reserve Chairman Alan Greenspan to Chauncey Gardner, the slow-witted character in the movie "Being There," starring Peter Sellers, who is mistaken by Washington politicians for an expert in economics.

The speech came one day before Merrill Lynch & Co. analyst Steven Milunovich said McNealy's "brash and contrarian personality" was "getting old." Milunovich wrote an open letter to the CEO and Sun's board calling for a makeover of McNealy's persona, including showing more respect for differing viewpoints.

"Scott to a large degree has been an impediment to what needs to be done," Milunovich said last week in an interview.

Sun's revenue has fallen nine straight quarters as companies increasingly choose servers that use Intel Corp. chips and Linux or Microsoft Corp. software. Sun's efforts to sell lower-cost machines have come up short.

Sun said last week that its fiscal first-quarter loss was 7 cents to 10 cents a share, wider than the 2 cents analysts had forecast. The company, which blamed "intense market and competitive dynamics" for the shortfall, is scheduled to report full results next week.

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