Sun co-founder Bechtolsheim makes start-up move

Updated at 12:30 p.m. PDT: Added comments from Andy Bechtolsheim.

Sun Microsystems co-founder Andy Bechtolsheim is shifting to a reduced role at the Silicon Valley stalwart as he turns his attention to getting yet another start-up off the ground.

He'll be taking on a new full-time gig as chairman and chief development officer at Arista Networks, which is focusing on 10-gigabit Ethernet switches. But Bechtolsheim believes that the company he helped found and build will do just fine without his day-to-day involvement.

Earlier Thursday, there had been some confusion about where exactly Bechtolsheim stood, following a report in The New York Times suggesting that he was leaving Sun. The company's PR team quickly responded by saying that there were a "few inaccurate articles published regarding the status of Sun co-founder, Andy Bechtolsheim."

The company's statement went on to say that "Sun can confirm that Andy will remain with Sun to continue his present involvement with the Sun Systems group in helping to drive new product architectures."

In his upcoming time with Sun, Bechtolsheim's efforts will include X64 servers and storage servers, along with strategic initiatives such as high-performance computing, Sun said.

I talked to Bechtolsheim in the wake of the Times story and he confirmed that he will still be part of the Sun family, but he also said that his role won't be what it was.

"I will be an adviser to Sun on a part-time basis," Bechtolsheim said. "I still have my Sun badge and e-mail address. But I will be working full time at Arista. I will always be associated with Sun, because it's my baby. I have a lot of friends there, and of course, I want to help them when I can."

Bechtolsheim, who had left Sun in 1995 to found networking start-up Granite Systems, which he later sold to Cisco Systems, has a long history as an entrepreneur. After selling Granite, he worked for Cisco for a time and then left in 2003 to found a start-up called Kealia that was making high-end media servers.

Sun reclaimed Bechtolsheim in 2004 by acquiring Kealia, a move that powered a fundamental technology shift to sell servers based on x86 chips as well as its own UltraSparc processors.

As in the past, Bechtolsheim said Thursday, it was time to move on to something new.

"The whole server business is not so much fun lately," he said. "And that's a problem way beyond me."

Indeed, Sun, which provides servers for large corporations, including the many banks and investment houses on Wall Street, has been hit particularly hard recently by the economic slowdown. Earlier this week, the company warned investors that it expected to report a big loss in the third quarter. The company said it expects to lose 25 cents to 35 cents a share. Excluding one-time charges, the loss is expected to be about 2 cents to 12 cents a share. This is worse than the loss of 1 cent a share that many analysts had expected.

The company, which has been battered by competition and slowing demand from financial customers, has struggled for nearly a decade with financial issues. The current economic crisis has only exacerbated the situation.

In another sign of trouble, Sun's largest shareholder, Southeastern Asset Management, upped its stake this week and has taken a more aggressive attitude toward its investment.

Can Sun weather the storm?
But Bechtolsheim believes he is leaving Sun in a good place in terms of its product road map.

"Sun is in the best product position they have been in for years," he said. "Many of the things that I have worked on since my return haven't even come out yet. There are many great products coming in the near future. So I don't worry about them from a product standpoint."

And even after the current product road map runs its course, Bechtolsheim said, he would continue to advise Sun on what to do next. But he acknowledged that Sun is struggling at the moment.

"The recession has impacted the big enterprise server market more than other things," he said. "That is a market that Sun is strong in and so it will suffer from a spending reduction. In that respect, it's not ideally positioned. But the fact it has great products will help it weather the storm."

While Bechtolsheim will continue to advise Sun on product architecture and strategy, most of his attention will be on his start-up, Arista. The company, which he invested in early, makes 10-gigabit Ethernet equipment designed to help companies with large data centers create a cloud-computing environment.

The big selling point of the new 10-gigabit Ethernet switches is that they have better performance and cost much less than products made by Cisco, the leader in the Ethernet switching market. But Bechtolsheim claims that this latest company is going after a niche market not currently addressed by Cisco.

Arista is using a unique software design to make its switch perform faster at a lower cost. And because the price is so much lower than what Cisco charges, Bechtolsheim and Jayshree Ullal, Arista's new CEO, believe the company can address a market that is underserved by Cisco. Ullal, who recently came on board, is a 15-year veteran of Cisco, where she led the company's switching and data center businesses.

"Believe me, I had gotten my share of opportunities to be CEO at Cisco competitors in the past," Ullal said. "But I knew I didn't want to compete directly with Cisco. In any market there are different segments. And we fully expect Cisco will have its place in mainstream, classical switching. We hope to complement them."

CNET News staff writer Stephen Shankland contributed to this report.