Scott McNealy, the outspoken Sun co-founder who led the company as chief executive for 22 years, has been kicked upstairs to the chairman suite, but is far from retiring.
McNealy, who co-founded Sun with Andy Bechtolsheim, Vinod Khosla and Bill Joy in 1982, grew the company to a peak market capitalisation of $200bn in 2000 during the dot-com boom. But when the bubble burst, many of Sun's customers went bust or stopped spending, and the company hit hard times.
Growth at the company slowed almost to a halt, and investors blamed McNealy for resisting layoffs and failing to adapt the business to take advantage of low-cost technologies.
Amid pressure to make changes, McNealy stepped down in 2006 and handpicked his successor, 41-year-old Jonathan Schwartz, Sun's former chief operating officer. Since the changing of the guard at Sun, the company has made sweeping changes that have boosted sales and returned the company to profitability.
Sun was long criticised as a company that benefited from many open-source projects without giving back in kind. But under its new leadership, the company has dramatically shifted course.
Over the past 18 months, the company has made its Solaris operating system, Java language and even Sparc processors available to the open-source community.
In a recent interview with the outspoken chairman, he spoke candidly about a variety of topics, from the company's decision to make its technology available to the open-source community to Sun's plans for the mobile market to education and activist investors.
Q: Was it a difficult decision for Sun to open up Java, Solaris and the Sparc technology to the open-source community?
A: I know the conventional wisdom lately is that we are just starting to open up our software. But we've been offering open-source software since 1982, so the answer is "no".
We started out as an open-source company from the time that Bill Joy developed the Berkeley Unix software. Then there was our work with TCP/IP, NFS and OpenOffice. We donated three times as much code as any other company before we even open-sourced the Java architecture.
Now there's no question that some of our technology got encumbered during the go-go years of the dot-com boom when we were just trying to add functionality as fast as we could. We've since gone back and unencumbered a lot of stuff that got encumbered. But I don't think that has ever been a change in our strategy.
We donated three times as much code as any other company before we even open-sourced the Java architecture
What should have been a harder decision was to encumber our software in the first place. But the decision to unencumber it and open-source it was never hard.
Has Sun already started to reap the benefits of opening up this technology to the open-source community?
Yes, it's showing up with stronger gross margins, improved profitability, better growth, happier customers and happier employees.
We've been able to leverage our R&D and improve security in the products. Also, it's resulted in better quality and better performance of the products.
These are all good things. I'm not quite sure there have been any negatives other than I think we're going to face more patent trolls. People like Kodak have already come after us on Java. And NetApps came after us on ZFS.
As we open source these technologies, the older, tired or insecure technology companies are going to try to use the patent hammer against the open-source community. That might be a downside, but we've got $6bn of cash and we're willing to take the hit.
Do you think the patent system is broken?
That's funny. Do you think breathing is good? Of course everything can be improved. Is the patent system perfect? No. Do I think patents should go away? No, but that's a much longer conversation.
There was a story published in a South Korean newspaper last week that quoted you as saying that Sun is working with Samsung on an iPhone-killer. What was that all about?
I absolutely never said that. It's a total inaccuracy. We have gone back to the newspaper to straighten it out. I didn't even come close to saying that.
But are you working on something that will rival Apple's iPhone?
As soon as we have it, we'll announce it. It's a secret.
What role do you see Sun playing in the mobile market?
We're actually providing the most ubiquitous programming environment out there with Java. It's on 90-plus percent of new phones going out the door.
That means more than 90 percent of them are Java-enabled. There's got to be close to a billion Java devices shipped every year.
We also launched JavaFX Mobile, which is the first Java open-source complete phone stack that can be adopted by any handset manufacturer or carrier who wants to customise and build a Java phone stack. It's open source so people can contribute code.
And we think we can build a community for Java phones, like we've done with Open Solaris and Open Sparc.
Sun has not had much luck in getting the world to scrap PCs in favour of thin clients. Do you still think the thin client will prevail?
Our Sun Ray thin client grew, year over year for the full year ended in June, 98 percent. It came out of the year in the fourth quarter growing at 102 percent. It might just be the fastest-growing product we have inside of Sun.
Earlier this month, Jonathan Schwartz said he plans to reorganise certain business units and combine Sun's storage and server product organisations into a new group called the Sun Systems. Does this mean anything about the health of the storage business unit?
CEOs reorganise. It's what they do. It has nothing to do with what the organisation is developing, selling, servicing and supporting. Everyone makes a big deal out of that.
Sun has been very consistent about outfitting the data centre. How we organise ourselves to outfit the data centre is…
