Sun Microsystems (JAVA): Expelling Jonathan Schwartz

May 1, 2008 by Douglas A. McIntyre

Jonathan Schwartz has become the kind of fast-talk, no delivery CEO whom investors loathe. He was the president of Sun Microsystems (JAVA) and in an appalling lack of judgment the company’s board picked him to replace founder Scott McNealy. McNealy had done a fairly poor job, but he was willing to insult Harvard classmate Steve Ballmer in public and could play hockey and golf

Scwhartz has a pony tail and writes a blog. He was out of his league on day one.

Scwhartz has driven Sun in dozens of directions, none of them worthwhile. He has "embraced" the chip business, the open source movement, and an attempt to keep Java as a viable platform. He hoped to get some attention by reverse splitting the firm’s stock and changing the company’s ticker symbol from SUNW to JAVA,, as if that would make any difference.

Schwartz has also been superb at firing the innocent. Another round of 1,500 to 2,500 souls will hit the exits over the next few months.

What Schwartz has not done is sell servers, the core to the company’s success. Revenue keeps moving down. In the most recent quarter sales dropped a tick to $3.266 billion and the company moved from a profit a year ago to a loss in the most recent period.

Sun’s shares are heading toward $10 with increasing velocity. The stock sold off 14% to $13.95 after the earnings announcement, putting below its 52-week low. The price was above $26 early last year.

Nearly everyone on Wall St. is puzzled about how Schwartz can keep his job as a serial failure.

Sun’s board needs to admit that Scwhartz is a long-time poseur who blogs incessantly about how great Sun and its people are just before axing them. And, the board has an opportunity to do something for shareholders by pushing Schwartz out before he damages the company beyond repair. Unless it is there already.

Douglas A. McIntyre