A Close Observer

Sun Needs IBM, Not Vice Versa

OK, so I work at Sun. I have mixed feelings about the IBM deal falling through. On one hand, IBM buying the company was a quick way to take out the current, hopelessly incompetent senior management team. This needs to happen.

On the other hand, it was a very ham-handed way to carry out a management change. I understand that SEMA and KKR very justifiably lost faith in Jonathan's ability to show results, and they probably want their money out - even at a loss. A loss at this juncture is less risky than continuing to bet on Jonathan's complete lack of business acumen. Oh, sure, (his PR people say) he's a "visionary". But what Sun really needs is solid business leadership. Jonathan is simply unable to step up to this need. He needs to be replaced. Hopefully this will happen at today's board meeting.

Sun still has a tremendous amount of potential. But that potential won't last forever. If the Board doesn't act to bring hire an outsider with solid business sense before too long, the window of opportunity will close, and Sun will fade into history.

IBM: Here Doesn't Come the Sun

I think "changing the management team" was the one ray of hope in this deal for Sun employees. The current bunch are not competent. Just look at their results.

Is Sun Ready to Give Up?

Actually, I'm neither a STK, nor a former, employee. I'm a current employee. And like every other employee with whom I work, I'm tired of Jonathon running Sun into the ditch. This company has good opportunity, just not with Jonathan at the helm.

McNealy may have been exiting as the CEO that purchased STK, but Jonathan was the COO. And he has been the CEO that has managed the acquisition integration and the ongoing lack of results.

Blaming Sun's problems on the financial industry meltdown is too simplistic - and incorrect. There's no question the recent financial markets issues have exacerbated Sun's problems. However, Sun has lost market share EACH AND EVERY quarter of the three years of Jonathan's leadership. The issues of the last one quarter have nothing to do with his performance over the last eleven quarters.

Mark Hurd and Lou Gerstner both turned around their considerably larger and more complex ships in less time than Jonathan has been able to show results at Sun.

Is Sun Ready to Give Up?

Joe Investor - There's nothing factually incorrect about the comments of Sun's Q1 results. Yes, the loss was largely due to the goodwill write-down, but those are the GAAP standards. That said, the loss was not due solely to the goodwill write-down. Sun reported a loss of $1.68 billion. The goodwill write-down was only $1.45 billion.

You're missing the forest for the trees. Sun is a horribly managed company. The financial results bear that out. Even the goodwill write-down is a manifestation of Schwartz's poor management. The write-down was required due to the impaired value of the goodwill carried on the books from the STK acquisition. Why was this value impaired? Because Schwartz bought the company for $4B ($3B of precious CASH) and he is now managing the business to YoY sales declines. It's one thing to buy a no-revenue startup and manage it into the dirt, but STK was a high-value ($4B) well-established business with YoY (albeit modest) increases in sales. Jonathon is now managing that into the dirt, too.

Jonathon Schwartz is an investor's worst nightmare.