Tech Industry

Sun CEO speaks of boom-era mistakes

Sun Microsystems chief Scott McNealy says he hired too many people and rented too much real estate. But he says he's learned from his errors, and the company's adjusting.

SAN FRANCISCO--Sun Chief Executive Scott McNealy said he's learned from mistakes he made in the manic Internet years of the late 1990s.

"I allowed us to hire too many folks in the field," McNealy said Thursday during a meeting at Sun's SunNetwork conference here.

And although he believes his company has dealt well with reducing inventory and personnel after the Internet bubble burst, he said there were still problems.

"The one place we really got caught and had to do major write-offs is real estate," McNealy said.

In 2001, Sun began layoffs of about 3,900 people, with another 1,000 layoffs set to be completed by the end of 2002. The Santa Clara, Calif.-based company hired at such a rate that at one point between the 20,000- and 40,000-employee marks, nearly half the company's workers had been with Sun for less than two years.

The company's stock soared through 2000 as Sun sold billions of dollars of high-end networked "server" computers, the brains behind sophisticated Internet services and corporate computing tasks such as recording sales and inventory. Since then, though, sales and the company's stock have plunged.

McNealy said Sun's stock price during the Internet mania years was ridiculous based on its revenue. "It was clearly the most unjustifiable market cap ever for a hardware company," he said.

Sun continues to address the personnel and office space issues, McNealy said. For field sales staff, Sun will in the future rely more on partners such as telecommunications companies that rent out computing resources and companies that integrate hardware and software for customers.

"I think we can grow revenues by partnering much more aggressively," McNealy said, increasing the amount of revenue per field sales employee.

Sun will focus its hiring instead on research and development personnel, McNealy said.

And to cut real estate costs, Sun has embarked on its "iWork" program, under which several employees share the same offices. "We're targeting 1.8 field people per office," McNealy said.

Sun is saving $40 million to $50 million now with its iWork program and believes the company can reach $140 million, McNealy said.

With the program, employees leave personal belongings such as family photos and books in a large briefcase they lock in a locker at the end of the day. When arriving the next, employees find the first empty cubicle the way they find a parking place, unpack their belongings and log into a computer.

Also at the conference Thursday, Sun detailed its years-long "N1" plan to unite servers, storage systems and network equipment into what is in effect a single large computer. And Wednesday, Sun announced an effort to use PCs running the Linux operating system to take on Microsoft Windows computers in some corporate markets where employees perform only a limited set of computer tasks.