April 28, 2006 10:00 AM PDT

Week in review: McNealy's sunset

CEOs at two major Silicon Valley players announced dramatic changes to their companies' structure in bids to become more competitive in their respective markets.

Scott McNealy, Sun Microsystems' co-founder, got the ball rolling by announcing he has stepped down as chief executive and has been replaced by President Jonathan Schwartz. McNealy, who will stay on as chairman, was one of four co-founders of Sun 24 years ago and has been CEO for the last 22 of those.

During his tenure at Sun, McNealy has been a strong and often contrarian voice for change in the computing industry. In recent years, his vision hasn't translated into financial success. McNealy led the server and software company through the dot-com bubble, but it hasn't returned to consistent growth or profitability.

McNealy and Schwartz said Sun's strategy will remain the same even as the former steps back to an active chairman role and the latter takes the company's reins. The company will preserve its major research and development budget, and a large layoff isn't going to happen, Schwartz said.

But the executives didn't persuade some outsiders, who expect that Schwartz eventually will have a different answer to the Wall Street cost-cutting pressure McNealy withstood for years. Sun's stock has been largely stagnant as the company has struggled with inconsistent profitability and revenue growth, but Schwartz promised on Monday that that would change.

The two Sun leaders discussed the executive changes with CNET News.com a few hours after Schwartz's promotion was announced.

CNET News.com readers mostly welcomed the change in leadership.

"Scott should have been gone years ago," one reader wrote in the TalkBack forum. "He may have been the right guy for a different time and age, but it's clear he was the wrong guy for post-dot-com Sun."

Meanwhile, Intel CEO Paul Otellini announced that the chipmaker will undergo a complete restructuring but did not mention whether layoffs would be part of that plan.

The project, which will look at ways to cut costs per unit and improve employee productivity, will take place over the next 90 days, he said. Intel plans to implement changes immediately as issues such as underperforming business units are discovered.

In an effort to overcome its loss of market share amid a slower-growing overall market, Intel plans to launch its largest product refresh in years.

Intel will adopt new "microarchitectures" every two years. A microarchitecture is reused to deliver several ever-faster generations of a processor family. That stepped-up release rate will match the speed with which Intel moves to more advanced silicon chip-manufacturing processes.

Net neutrality
The battle to prevent Net companies from creating tiered Internet service was dealt a setback when a bid to create extensive Net neutrality regulations failed in the U.S. House of Representatives. By a 34-22 vote, members of the House Energy and Commerce Committee rejected a Democrat-backed Net neutrality amendment that also enjoyed support from Internet and software companies such as Microsoft, Amazon.com and Google.

At issue is a concept known as Net neutrality, also called network neutrality. It's a philosophy supported by Internet content providers that would prohibit broadband providers such as telephone companies from prioritizing certain types of Web traffic--such as streaming video or their own preferred content.

Opponents of the bill's Net neutrality portion say it doesn't go far enough to target possible errant behavior by AT&T, Verizon Communications and other Internet service providers.

In an effort to support the bill, a broad coalition of media, consumer and Internet groups organized behind a dramatic tagline: "Save the Internet." Dozens of organizations ranging from Gun Owners of America to MoveOn.org to the American Library Association launched a Web site under the "Save the Internet" banner.

CONTINUED: Tech goes to court…
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Scott McNealy, Jonathan Schwartz, Net Neutrality, Sun Microsystems Inc., Week in review

 

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