Wired: McNealy’s Last Stand

“Stiff-legged and hunched over, Scott McNealy limps slowly to a
wheat-colored couch in the corner of his office. His eyes are
bleary, and a wrinkly wattle is forming about his neck. In his
semi-exhausted state, McNealy looks almost frail. There was a time
not that long ago when the smash-mouthed, overamped CEO of Sun
Microsystems would have been shuffling along like this because of a
nasty collision during a no-holds-barred intramural hockey game.
Instead, the culprit is a long international flight home two days
ago following a week-and-a-half swing through Asia. ‘I’m getting
old,’ groans the 48-year-old McNealy.

“Age may be one explanation for his woes, but there are others:
his company’s stock price, slumping sales, and customer defections,
not to mention threats posed by a burgeoning list of competitors.
Share prices of nearly every publicly traded Silicon Valley firm
have plummeted since 2000, of course, but few have fallen as
precipitously as Sun’s. As of early May, its stock, down 94 percent
from a 2000 high, was trading pretty much exactly where it was in
1996, when the computer maker was in the early arc of its
dotcom-fueled rocket ride. In its heyday, Sun sometimes sold as
much as $5 billion worth of computer equipment, software, and
services in a single quarter, but over the past few years quarterly
revenue has dropped to nearly half that. Revenue fell an additional
10 percent in the first three months of 2003, marking the eighth
consecutive quarterly decline.

“The problem is that Sun specializes in the kind of top-end
systems–super-sleek servers running on scores of expensive,
high-performance chips yoked together by Solaris, Sun’s
well-regarded operating system–that have fallen out of favor.
Morgan Stanley, Credit Suisse First Boston, Pixar, and the E*Trade
Group are among the major companies that have swapped out Sun
machines in recent months for so-called Lintel boxes: cheaper
servers running the Linux operating system on Intel-compatible
microprocessors. Even Google, headed up by former Sun star Eric
Schmidt, uses Lintel machines to run one of the world’s busiest Web
sites. Of the 20 Wall Street analysts who cover Sun, only one rates
the company a buy. This month, Wired drops Sun from its list of the
40 most forward-looking companies, a group it has been part of
since the list debuted in 1998…”

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