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McNealy: Rehired CFO a top pick from the start

Sun CEO says Mike Lehman was always in the running to return to post and not a last resort.

MENLO PARK, Calif.--When Sun announced a search for a new chief financial in October, company chief Scott McNealy already had a top contender in mind: former CFO Mike Lehman.

"I knew going into that search I always had a brilliant answer in my back pocket," Sun CEO McNealy said in a meeting with reporters here on Friday.

However, the company had a "fiduciary duty" to perform a thorough search, in case someone else was a better pick, McNealy said. "I wanted to make sure we gave everyone in the internal and external space a chance to take a good hard look it," he said.

Sun announced Lehman's return to the CFO post last week, a move that sees the 55-year-old resign his position on Sun's board of directors to replace Steve McGowan. McNealy said Friday that McGowan, who last October announced his plan to retire, will "stay on board at least through the end of this fiscal year" in June.

Lehman, who left the CFO post in 2002, apparently was a tough negotiator. In a regulatory filing Friday, Sun disclosed Lehman's new salary will be $700,000, not including bonus. He also was granted 350,000 shares of restricted stock, and options to purchase 500,000 shares of common stock. Half the options and restricted stock will become available in 18 months and the rest in three years.

By comparison, in the fiscal year 2005 ended last June, McNealy had a salary of $121,789, bonus of $1.1 million and 1.25 million stock options. President Jonathan Schwartz had a salary of $812,308, bonus of $280,000 and 800,000 options, according to an earlier regulatory filing.

In a brief appearance in the meeting Friday, Lehman assured reporters he's up to speed on Sun's situation. That situation includes new server products such as UltraSparc T1 "Niagara"-based servers and "Galaxy" line of x86 servers. It likely also covers Sun's inability to achieve consistent revenue growth.

"I just left the board on Wednesday," Lehman said. "Sun's board is extremely active and very knowledgeable. They understand the strategy, vision, choices, the resource levels, the investments. I come in with a good base of knowledge."

One thing that's changed since Lehman departed in 2002 is the arrival of Schwartz as president and chief operating officer. But Lehman said he is well-acquainted with Schwartz, who reported to Lehman for a year and even shared his office.

"There's a comfort level of me coming back in. I've now got the time, the energy and the passion to come back to this place and make a difference," Lehman said. "I feel very good about where the company is at. We're in better shape product-wise, strategy-wise, and resource-wise than we have been in several years."