Sun's McNealy Steps Down

Updated from April 24

Sun Microsystems'SUNW third-quarter earnings report had a brief spotlight Monday until the company announced that longtime CEO Scott McNealy would be replaced by President and Chief Operating Officer Jonathan Schwartz.

McNealy, 51, will continue serving as chairman and a full-time employee, "devoted to expanding market opportunities for Sun around the globe," the company said. Schwartz also will keep title of president.

In early Tuesday trading, shares of Sun rose 22 cents, or 4.4%, to $5.20.

"I think Jonathan is the right person to ride Sun forward on this next big wave," McNealy said in a conference call following the announcement.

Emphasizing the continuity in the company's strategic vision going forward, McNealy said he and Schwartz "can finish each other's sentences," and described the two as being in "lockstep."

McNealy stressed that the decision to relinquish the chief executive title, which is effective immediately, was his and not the board's. "The timing fit me to a T and it was my call," he said.

McNealy founded Sun Microsystems along with Andy Bechtolsheim, Bill Joy and Vinod Khosla in 1982, and has been the icon for the "open systems" movement. He was named Sun's chief executive officer and elected chairman in 1984.

Rumors of McNealy's impending departure from the CEO chair had surfaced recently amid growing calls by Wall Street for the company to impose huge layoffs to reverse its financial struggle. With McNealy reportedly opposed to such deep cuts, some analysts wondered how long the company could carry on with current management.

McNealy said he has been working on a succession plan for the last six or seven years but that the timing was not right until now.

"I wasn't going to hand it over when the thing was deteriorating post-bubble," he said.