Lessons From Scott McNealy: Don't Let Economics Majors Be CEOs (SUNW)

| About: Sun Microsystems (JAVA)
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The Stalwart submits: Quick, think of almost any blog-borne buzzword: Linux, AJAX, grid computing, open source, network as the computer, thin client, XML, blog etc. etc. etc. Every one of these, and more, could somehow be associated with Sun Microsystems Inc. (NASDAQ:SUNW). Yet for all the buzz, the company remains the only tech giant still mired in a post-bubble funk. Granted, none of them have returned to their former glory, but Sun isn't even profitable.

Want some perspective? Even Gateway is profitable. Ouch.

And now Scott McNealy is gone. The last interesting thing I read on Sun, and Mr. McNealy, was a BusinessWeek article from July 2004. One passage really stands out in my memory:

Through interviews with 38 current and former Sun executives, including nine departees on the record, BusinessWeek has learned that as Sun's situation deteriorated, McNealy was bucking not just the counsel of outsiders but also that of his own lieutenants. After the tech industry went into its long slide in late 2000, virtually his entire management team, including Chief Scientist Bill Joy and President Edward J. Zander, pleaded with McNealy to scale back his vision and adjust to meaner times.

Time and again, McNealy refused. An economics major during his days at Harvard University, he was convinced that the economy would snap back quickly from its slump, insiders say. Plus, he believed that the Net was so critical to companies that they couldn't hold off buying gear for long.

There's your cautionary tale -- don't let an economics major be the CEO. The thing is, economists speak with such confidence, and their confidence grows when they're being unconventional. Though rubbish, he almost certainly believed what he said.

In the end, the company, for the last 6 years, has been more concerned with being cool than with being profitable. The shareholders, presumably, would have preferred profitability and growth, which is supposedly what incoming CEO Jonathan Schwartz will focus on. Of course, isn't this what all CEOs are always supposed to focus on?