McNealy on Schwartz: I've been working pretty hard to get him into this role

During the conference call with the media, former Sun CEO and now Chairman Scott McNealy praised his replacement Jonathan Schwartz, saying that he had worked "pretty hard to get him into this role," spotting his talent and watching him through seven jobs at Sun in the last 10 years. "He and I can finish each others' sentences...and he has something very rare--that's courage," McNealy said. He also praised Schwartz's work in executing on a product strategy, saying that he drove key initiatives and cross industry efforts, such as the Liberty Alliance, and has been a huge driver of edgy new marketing around eco-friendly and Cool Threads. 'We are one of last bastions of R&D that can change the world.' -- Schwartz Schwartz was equally complimentary. "There are two reasons why people come to work if not they are working for a paycheck. You love your job or you love your boss. I am in a rare position ot have both."

McNealy explained the timing of the moves, saying that he didn't want to hand over the reigns when the company was deteriorating, such as after the bubble. "This have been an ongoing conversation and on a late Friday night phone call with board, I said gang its time," McNealy said. "Most importantly, the quality and customer satisfaction stuff go fixed, so we are moving out of fixing and stabalizing and getting back to growth and being aggressive in the market place and going after share," McNealy said about the timing of the move. McNealy gushed that it's never been better at Sun, and that the company has a "wonderful broad-based growth and improving economic indicators across the board" going into strategic planning for the next fiscal year. "I can't find any upset customers," he added.

Schwartz exposed the logic of his decision to take the CEO job (although it probably took little convincing, if any). He praised the leadership quality of the team (both he and McNealy made a point of referencing the "leadership factory," as an explanation for the revolving door of executives, similar to Oracle), the quality of the technical assets and customer base and finally, the market opportunity. "It a rare market opportunity. The demand for network innovation will never delcine as long as any of us are on the earth...not even the oil industry can look forward to perpetutal demand," Schwartz said. "We aren't worried about demand, it's about intercepting demand."

Schwartz proclaimed that all technology is becoming a service platform. "Most of the world's computing resources will be purchased through computing utilities," Schwartz said, pointing to Sun effort to sell compute cycles per hour with the Sun Grid. However, Schwartz's vision for the planetary service grid is ahead of its time, and he and his team will have to convince lots of customers to jump on the grid sooner than later.

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"We are going to redbouble our focus on the key innovations that yield business advantage to our core customers, the largest and most successful service operators," he added, mentioning customers such as Salesforce.com, eBay and Wells Fargo. "Small business is not our target...it's the large scale operators that serve smaller businesses. Solaris was brought up as the kind of core technology and brand that Sun will continue to invest in.

Schwartz said he doesn't expect to make any major changes. "Our vision is the network is the computer...and we will continue to value intellectual property as a key differentiator and drive R&D as a core asset for the company," he said. Improving operational efficiency is a focus on not just the next 90 days, but the next 90 years. Greg Papadopoulos will become the executive vice president in charge of Sun's $2 billion R&D efforts, architecting the business for the a future based on technology, Schwartz said. "We are one of last bastions of R&D that can change the world," he added. He said that he and CFO Mike Lehman would be sharing an office, as would other executive teams, such as chief marketing officer Anil Gadre and sales chief Don Grantham.

During the first 90 days, Schwartz said he is undertaking a comprehensive review of growth opportunities. "It's how to grow next the next ten years...we are not trying to take a whack at headcount," he said. "We have a strong orientation to grow value at Sun...pruning what doesn't yield return."

McNealy said he will spend his time talking to heads of states and large service providers, opening doors and serving as the chief Sun evangelist full time. 

Wall Street seemed to like the moves--Sun's stock was up over 7 percent (crossing the $5 barrier) in after-hours trading. Now Schwartz has to show that he can excite Wall Street with Sun's numbers quarter by quarter...

Jonathan Schwartz, Scott McNealy and Google CEO Eric Schmidt take questions at announcement of a Sun-Google alliance in October 2005. During McNealy's watch, Sun had group hugs with Microsoft, Oracle and Google, but that hasn't tilted the playing field in Sun's favor.