Will Suns McNealy Stay or Go?

Thats the million-dollar question about the future of Sun Microsystems CEO and co-founder Scott McNealy. Well, at least thats what the rumor machine would like us to believe.

Speculation about McNealys future at Sun is not new: Weve been there so many times before, and well most certainly be there again. It would be interesting to know how he was described in his class yearbook—"the most likely to be fired" would be the tag line detractors would now most like to see.

It must be tough for McNealy having the dubious honor of being the CEO most predicted to leave or be forced out of any modern-day high-tech firm, not just because of how it affects his ability to effectively run the company, but also because of the enormous impact the endless rumors must have on the thousands of Sun staff.

So why has the rumor mill reached fever pitch on this issue yet again? There are a few primary reasons for it.

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Firstly, a number of Sun executives have left the company in recent months, including John Loiacono, Suns former executive vice president of software, who moved to a position as senior vice president of creative solutions at Adobe Systems after 20 years with Sun; Marge Breya, formerly Suns senior vice president of marketing in global sales operations, who went to BEA Systems; and Chief Competitive Officer Shahin Khan, who joined Azul Systems.

But, on the flip side, a number of former executives have also returned to Sun, including former Chief Financial Officer Michael Lehman, who came back from retirement as Suns CFO in February, and co-founder Andy Bechtolsheim, who now leads the design team for its Galaxy line of x86 servers.

Also back in the Sun fold are Tom Goguen, back from Apple, as vice president of operating system products; Karen Tagan-Padir, who moved back from Red Hat to lead the development of Suns Java server software; and Peder Ulander, who left Sun in 2004 for embedded Linux specialist MontaVista, but recently rejoined the firm as vice president of software marketing.

So that essentially undermines one of the theories being floated that Sun executives are fleeing a sinking ship.

To read more about Suns recent executive appointments, click here.

But one of the biggest questions fueling the speculation fervor is why someone like Lehman, who could become the CEO or CFO of just about any company, would come back out of retirement and off the Sun board to take exactly the same job he held before.

A former Sun executive who still has close links to the company told me that that question is what is driving most of the speculation within Sun. No one can understand why Lehman would come back unless it were to transition to a more senior position like CEO.

He also cited as an example former Sun Chief Operating Officer Ed Zander, who left Sun and became CEO of Motorola the next month.

So, while Sun management has said Lehman is tasked with looking at how to further cut costs and make the company a leaner, nimbler and more competitive one, few are buying it. Instead many are speculating that he is actually looking at how to restructure top management and that he could potentially be McNealys replacement.

Adding to the speculation was the prediction made in March by Mark Stahlman, a research analyst for Caris & Company, that McNealy would step down. Stahlman was widely reported as saying that when he last spoke with McNealy, he said would stay on until "the job was done," which entailed three things: re-establishing product superiority, regaining control over costs and igniting demand in a broad and balanced customer base.

"In our opinion, these three criteria have largely been met," Stahlman said. "Accordingly, we will not be surprised if McNealy does indeed decide to step down."

Next Page: McNealy speaks for himself.