Zander to Step Down at Sun

Sun Microsystems Inc. announced Wednesday that President and COO, Ed Zander is resigning. Company Chairman and CEO, Scott McNealy will assume Zander's duties July 1.

Ed Zander, who has become almost as visible a face at Sun Microsystems Inc. as Chairman and CEO Scott McNealy, will retire as president and chief operating officer July 1.

McNealy will take over Zanders duties starting then, regaining the title of president. The Palo Alto, Calif., company said in a statement Wednesday that it did not intend to replace Zander, who has been with the firm for 15 years.

"Over the last 15 years, Ed has worked tirelessly to lead Sun through several transformations and to the forefront of the computer industry," McNealy said in a prepared statement. "Most importantly, he will leave Sun having developed an incredibly capable and broad team that has the same keen understanding of customers, execution and leadership."

In the same statement, Zander said that with Sun "marching down the path back to profitability" and having made changes in how it deals with products and customers, "I believe I have accomplished what I set out to do."

After July 1, Zander will stay with Sun to help McNealy with the transition and spend the rest of the calendar year teaching and mentoring at the company.

Zanders departure is the latest in a series at Sun in recent weeks. Others announcing their departures include Chief Financial Officer Mike Lehman, and John Shoemaker and Larry Hambly, who head the computer systems and services units, respectively.

Richard Chu, an analyst with S.G. Cowen Securities Corp., said he expects more changes at Sun.

"McNealys argument that they leave the company in good strong shape may be valid, considering the company has achieved dramatically better mind share that remains even after the collapse of the Internet bubble," said Chu, in Boston. "But their departure comes with the stock at about a three-year low. Certainly at that level it does not send a confident message to shareholders about prospects for rapid recovery in the value of the stock.

"For about 18 months weve had a neutral rating. Sun is now facing more intense competition, whether its IBM or Microsoft at one level, or HP/Compaq and Dell at the low-end of the market, where were beginning to see some signs of commoditization."

He also said he was surprised at Wednesdays announcement concerning Zander.

"There certainly had been some rumblings for some time that Mike Lehman, the CFO, would retire. But to my knowledge there were no such rumors on Zander," Chu said. "In announcing Lehmans departure, McNealy hinted that there were more changes to come, but certainly I did not expect it to be at the COO level."

There will be several other management changes at Sun this summer. On July 1, Jonathan Schwartz, its current chief strategy officer, will become executive vice president of an expanded software group.

The new group will unify its current software operations and brands, including the Solaris Operating Environment, the StarOffice productivity suite, the Java platform and all Sun Open Net Environment products.

In addition, Pat Sueltz, the current executive vice president of software systems, will replace Hambly, and Mark Tolliver, currently president of iPlanet, will become executive vice president of Suns new marketing and business development organization.

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