Turning Around Sun Microsystems

Scott McNealy ran Sun Microsystems for 22 years and became as famous as that pioneering workstation company itself. We knew about his minus golf handicap, his loathing of Microsoft ("Windows is a hairball!"), his cocky insistence that his company's gear (work-stations, servers, storage equipment, etc.) was worth a premium. So how does a new CEO follow that act? If you're Jonathan Schwartz, 42, you focus on forging partnerships with competitors (even Microsoft), put open source at the center of your strategy and begin a blog. Schwartz, who joined Sun when it bought his small company in 1996, has not only staunched the flow of red ink, but had four profitable quarters in a row. Wearing a suit and, of course, his trademark ponytail, Schwartz dropped in to NEWSWEEK recently to talk about his 18 months in the top job.

Levy: After your illustrious predecessor, how did you establish your leadership?
Schwartz : I just [decided to] lead in a way that I want the organization to be led. With one exception: the head of H.R. came to me and said, "You have to write down what a leader is." I thought, "No problem, I type really fast, I'll go home ever the weekend and do it." And on my 35th draft, about six months later, I felt like I had something that I wanted to live with for 10 years.

What did you wind up with?
The one word that to me really embodies a leader is courage.

What was it, besides courage, that led to the return of profits?
We took the core of the company, probably its most precious asset—the Solaris operating system—and made it freely available. No. 2 was to reduce the scope of our efforts—we had to reduce our head count, go find synergies and create partnerships that gave us a different alternative.

How do you make money by giving away your most valuable product?
If you give away your products, developers will create businesses and products based on your products. And they may one day go to work for enterprises that do pay. At that point we will make money selling them software, storage, computing systems, networking systems, services and so on.

You recently changed your stock-ticker name to Java. Why?
Most people who have a cell phone know Java. If you go to Thailand and ask 14-year-olds "Do you know what Java is?" they'll tell you yes. They may not know Google, they may not know Microsoft, but they know what Java is.

A big buzzword for you lately is eco-computing. What is Sun doing in that area?
A few years ago we predicted the cost of power would eventually eclipse the cost of a computer, and right now in Tokyo that is the case. How do we begin to really limit the power waste and go focus on the efficiency of the work that most data centers want to go do? We introduced a very odd product about a year and a half ago, a computer that was not very fast at doing one thing, but it was very efficient at doing 32 things at the same time. We called it Niagara servers, as in Niagara Falls. That product went from zero to a $100 million in revenue within [a few] quarters.

How much do you save by doing that?
Up to 50 to 74 percent of your power bill.

What are the pros and cons of a CEO blog?
If something happens, I don't want to rely on third parties to interpret it, I just want to be right there to talk about it. So the upside is, we're among the most transparent companies in the marketplace. The downside is, every once in a while, you get some particularly unkind personal attack. I'm fine standing up for the performance of the company, but when it comes to personal appearance or religious ethnicity, I'm not so OK with that.

You get flak for the ponytail, too.
It would be easier to get a really short haircut, stop speaking publicly, go hole up inside an office and never talk to the world, and have somebody else write the letter to the shareholder. But I'd like to grow a company. I think the best way for me to communicate the values of the company is every day and every week.

Twenty years ago you almost died in a train accident. What did you take from that?
It taught me true definition of risk. I'd been working for McKinsey. I left to go start a company with a bunch of friends. We ate beans and rice for a year because we didn't have any money. The worst that could happen is that we'd fail and then we'd all get into grad school. It's not as though we were going to die. A lot of the way I think about the world is a derivative of that train accident.

Join the Discussion