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CEO of Sun Resigns Post

Scott McNealy will stay on as chairman of the computer maker. Its shares jump 8.6% after news of his move and a wider 3rd-quarter loss.

April 25, 2006|From the Associated Press

Scott McNealy, the often acerbic co-founder of Sun Microsystems Inc. and one of Microsoft Corp.'s harshest critics, stepped down as chief executive after 22 years Monday as the pioneering maker of computer servers reported its latest quarterly loss.

Sun President Jonathan Schwartz takes on the responsibilities of chief executive, while McNealy remains the chairman and a full-time employee of the Santa Clara, Calif.-based company.

"This isn't about me. It's about a big moment in Sun's history and I'm proud to share that with you," McNealy said in a conference call. "There's lots more work to do, and I'm certainly going to stay around and support that."

Sun's shares surged 8.6% after the announcement of McNealy's departure and the latest in a series of losses.

McNealy's mantra, "The network is the computer," helped Sun grow into one of the dominant providers of large computer servers that sell for tens of millions of dollars apiece. After the collapse of the Internet bubble in 2000, he saw revenue decline and frequently came under pressure for not cutting costs enough.

McNealy, 51, co-founded Sun in 1982, developing it into a scrappy Silicon Valley start-up whose high-powered computers, or workstations, became a staple with engineers and businesses.

In 1996, after Microsoft products began encroaching on Sun's territory, McNealy reinvented the company as a maker of servers, which performed the same tasks as mainframe computers for a fraction of the cost.

Sun's servers, which came about just as the Internet was morphing from an academic hobby to a mass communication platform, helped to speed the transformation.

"He was an instrumental part of making the Internet happen," said Rob Enderle, principal analyst with San Jose-based Enderle Group. "When you're on the Web and doing shopping, say a little prayer for Scott because he's part of what got you there."

Sun posted a wider fiscal third-quarter loss Monday as costs for acquisitions, stock-based compensation and restructuring chipped away at higher revenue.

The net loss for the three months ended March 26 was $217 million, or 6 cents a share, compared with $28 million, or 1 cent, a year earlier. Revenue grew 21% to $3.18 billion from $2.63 billion, as recent acquisitions boosted sales.

The results met Wall Street expectations. Analysts were expecting a loss of 6 cents a share on sales of $3.2 billion, according to a Thomson Financial survey.

News of McNealy's departure and the company's results were announced after financial markets closed. Sun shares rose 5 cents to $4.98 in regular trading. They gained 43 cents to $5.41 after hours. Sun shares have traded between $3.42 and $5.40 in the last year.

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