McNealy Reorganizes Sun

Sun Chief Executive Scott McNealy reorganized Sun Microsystems Inc. (NASDAQ: SUNW) today in response to pressure from the channel, according to a report by Deborah Gage that is posted on the Computer Reseller News Web site, CRN Online, at http://www.crn.com/.

CRN Online's report features details of Sun's reorganization plans, which include folding SunExpress, Inc., its aftermarket direct-sales arm, into parent company Sun Microsystems Computer Company. As a result, SunExpress has ceased to exist as a separate business unit, and there are now six business units left at Sun: SMCC, Sun Service, SunSoft, JavaSoft, Sun Microelectronics and Sun Laboratories.

The report says that resellers praised the move but acknowledge there are still many issues to be resolved and quotes Norm Shockley Jr., president of Acclaim Technology Inc., San Jose, Calif., as saying, "Sun is now getting control of SunExpress under Ed Zander to evaluate it and figure out what they need to do. But initially, that won't reduce the conflict."

The report also features excerpts from McNealy's statement to employees, which includes the following: "Sun Express has been competing not just with resellers but also with Sun's direct-sales force. They will try to address all of that." "As you all know, we are in the fastest changing industry in the world. With that in mind, we created the opco (operating company) structure to give us flexibility for responding to new business needs.

"There are a number of reasons for this decision. First, there will be significant gains for our customers, since this will help us present one face to the customer and reduce any perception of confusion or channel conflict in the field. In addition to the external advantages, we will also generate a high level of synergy from moving SunExpress into SMCC (Sun's hardware unit)," McNealy said.

Following is additional reporting from CRN Online's article:

McNealy has created a transition team that includes SMCC President Ed Zander and SunExpress President Dorothy Terrell. The team will decide how SMCC can "leverage the core competencies of SunExpress" and help define Terrell's future role at Sun.

McNealy praised Terrell for her work in making SunExpress one of Sun's fastest-growing business units and said he intends to keep SunExpress as a "productive unit within SMCC."

He also said he has no plans to move SunExpress geographically and that there will be no impact on jobs in the short term or on Sun's planned site in Burlington, Mass.

Sun's hardware and software resellers have complained that they were undercut by SunExpress on products that required them to invest time in sales and support (CRN, April 21).

Most recently, SMCC resellers were upset that Sun Express was selling networking products and services from Cisco Systems Inc.

Sources close to Sun said there are also talks about the future role of Sun Microelectronics, Sun's chip unit. SME is negotiating with MicroAge Inc. to distribute PCI-based UltraSPARC motherboards for resellers to build Web servers. These systems could in turn compete with systems sold by SMCC.

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SOURCE: CMP Media, Inc.

CONTACT: Leslie Dunbar of CMP Media, 516-562-7040 or ldunbar@cmp.com