Week in review: McNealy's sunset

Two Silicon Valley CEOs announce dramatic company structure changes in bids to become more competitive.

CEOs at two major Silicon Valley players announced dramatic changes to their companies' structure in bids to become more competitive in their respective markets.

Scott McNealy, Sun Microsystems' co-founder, got the ball rolling by announcing he has stepped down as chief executive and has been replaced by President Jonathan Schwartz. McNealy, who will stay on as chairman, was one of four co-founders of Sun 24 years ago and has been CEO for the last 22 of those.

During his tenure at Sun, McNealy has been a strong and often contrarian voice for change in the computing industry. In recent years, his vision hasn't translated into financial success. McNealy led the server and software company through the dot-com bubble, but it hasn't returned to consistent growth or profitability.

McNealy and Schwartz said Sun's strategy will remain the same even as the former steps back to an active chairman role and the latter takes the company's reins. The company will preserve its major research and development budget, and a large layoff isn't going to happen, Schwartz said.

But the executives didn't persuade some outsiders, who expect that Schwartz eventually will have a different answer to the Wall Street cost-cutting pressure McNealy withstood for years. Sun's stock has been largely stagnant as the company has struggled with inconsistent profitability and revenue growth, but Schwartz promised on Monday that that would change.

The two Sun leaders discussed the executive changes with CNET News.com a few hours after Schwartz's promotion was announced.

CNET News.com readers mostly welcomed the change in leadership.

"Scott should have been gone years ago," one reader wrote in the TalkBack forum. "He may have been the right guy for a different time and age, but it's clear he was the wrong guy for post-dot-com Sun."

Meanwhile, Intel CEO Paul Otellini announced that the chipmaker will undergo a complete restructuring but did not mention whether layoffs would be part of that plan.

The project, which will look at ways to cut costs per unit and improve employee productivity, will take place over the next 90 days, he said. Intel plans to implement changes immediately as issues such as underperforming business units are discovered.

In an effort to overcome its loss of market share amid a slower-growing overall market, Intel plans to launch its largest product refresh in years.

Intel will adopt new "microarchitectures" every two years. A microarchitecture is reused to deliver several ever-faster generations of a processor family. That stepped-up release rate will match the speed with which Intel moves to more advanced silicon chip-manufacturing processes.

Net neutrality
The battle to prevent Net companies from creating tiered Internet service was dealt a setback when a bid to create extensive Net neutrality regulations failed in the U.S. House of Representatives. By a 34-22 vote, members of the House Energy and Commerce Committee rejected a Democrat-backed Net neutrality amendment that also enjoyed support from Internet and software companies such as Microsoft, Amazon.com and Google.

At issue is a concept known as Net neutrality, also called network neutrality. It's a philosophy supported by Internet content providers that would prohibit broadband providers such as telephone companies from prioritizing certain types of Web traffic--such as streaming video or their own preferred content.

Opponents of the bill's Net neutrality portion say it doesn't go far enough to target possible errant behavior by AT&T, Verizon Communications and other Internet service providers.

In an effort to support the bill, a broad coalition of media, consumer and Internet groups organized behind a dramatic tagline: "Save the Internet." Dozens of organizations ranging from Gun Owners of America to MoveOn.org to the American Library Association launched a Web site under the "Save the Internet" banner.

In another corner of the Net fight, more Americans would be forced to pay taxes subsidizing broadband service in "unserved" locales, and cities would be free to go into the Wi-Fi business under an upcoming U.S. Senate bill. The Broadband for America Act of 2006 would focus on four major areas. It would require the Federal Communications Commission to establish rules requiring that all companies "capable of supporting two-way voice communications" pay into the Universal Service Fund, a multibillion-dollar pool of money that's currently used to subsidize telecommunications services in rural and other high-cost areas, schools and libraries.

Tech goes to court
In a verdict that will likely send shivers through a PC industry already skittish about patent lawsuits, a court ordered Hynix Semiconductor to pay rival Rambus $306.5 million in damages.

Memory designer Rambus had alleged that Hynix and other large memory manufacturers infringed its patents in producing DDR DRAM--the most common type of memory in PCs today.

In the next phase of the trial, starting this summer, Rambus will seek an injunction barring Hynix from selling DDR, DDR2 and SDRAM. Rather than face an injunction, defendants often agree to pay additional amounts to the plaintiffs through a license.

Also in court this week, Sanjay Kumar, the former chief executive of CA, pleaded guilty to charges of financial fraud, part of a bookkeeping scandal that tarred the software company's image. The former CEO was indicted in September 2004 on charges of manipulating CA's finances illegally. Kumar and another former executive pleaded guilty to all accounts against them, including securities fraud, obstruction of justice and perjury. A sentencing is scheduled for Sept. 12.

Sure, cooking the company books is pretty serious stuff. But what about Web surfing on the company's dime? An administrative-law judge ruled that a New York City employee cannot be fired for surfing the Web from work.

The judge ruled that agencies should apply the same standard to personal Internet use as they do to other personal activities. He noted that many agencies allow employees to take personal calls, or even read the newspaper, as long as those activities do not interfere with a worker's overall performance.

Fighting the fumes
With the high price of gas showing no signs of coming down, researchers at several universities are looking at new types of vehicles and sources of fuel for cars.

The concept of a car that doesn't need gas, or at least not much, is getting slightly more realistic all the time. A few small companies will start to offer services and products for converting hybrid cars like the Toyota Prius that currently get about 50 miles per gallon into plug-in hybrids that rely more heavily on electrical power and can get about 100 miles per gallon.

But conversion won't be cheap--at least initially. California's EDrive Systems will charge about $10,000 to $12,000 to install the extra lithium batteries needed to turn a standard Prius into a plug-in hybrid when its service begins later this summer.

Another alternative is a three-wheel vehicle produced by a group of European universities. The vehicle would combine some of the best elements of a Mini Cooper, a motorcycle and a camp stove.

The Clever (compact low-emission vehicle for urban transport) is a three-wheeler designed for city driving. Like a microcar, it is small--measuring only a meter wide, or close to 3 feet, narrower than regular cars--so it can fit into tight parking spots. Ultimately, the car may allow city designers to build narrower roads or better disperse traffic congestion.

Rising gas prices have also sparked a new proposal in Congress that would pony up millions of taxpayer dollars to reward hydrogen energy breakthroughs. The H-Prize Act of 2006 would create three categories of prizes to be awarded over the next decade, including a $100 million berth for "transformational changes in technologies for the distribution or production of hydrogen that meet or exceed far-reaching objective criteria."

Smaller awards of up to $1 million would be distributed every other year to inventions in four categories: hydrogen production, storage, distribution and utilization. In alternate years, one prize of up to $4 million would go to those who achieve prototypes of hydrogen-powered vehicles or other products that meet certain predetermined benchmarks.

Also of note
Yahoo released a beta version of software that turns a PC into a digital video recorder...Broadband service providers got the green light from the California Public Utilities Commission to test broadband over power line technology...Nintendo's forthcoming next-generation video game console has received its real name: "Wii."

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