CEO of Sun Microsystems to Step Down

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

Jonathan Schwartz, Sun’s president, will retain that position and take over as chief executive, while McNealy will remain chairman and a full-time employee of the Santa Clara-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 on 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 more than 8 percent 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. Following 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 Santa Clara-based Sun Microsystems in 1982, developing it into a scrappy Silicon Valley startup whose high-powered computers, called workstations, became a major 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 speed the transformation.

“He was an instrumental part of making the Internet happen,” said Rob Enderle, principal analyst with the Enderle group. “When your on the Web and doing shopping, say a little prayer for Scott because he’s part of what got you there.”

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

The net loss for the three months ending March 26 was $217 million, or 6 cents a share, compared with $28 million, or 1 cent, in the same period last year. Revenue grew 5 percent to $3.18 billion from $2.63 billion, as recent acquisitions boosted sales.

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

News of McNealy’s departure and the company’s results were announced after financial markets closed. Earlier, Sun shares closed 5 cents higher to $4.98 on the Nasdaq Stock Market. In extended-session trading, they gained 41 cents, or 8.2 percent.

In the past year, Sun shares have traded between $3.42 and $5.40.