Ed Zander, President of Sun MicrosystemsScott McNealy, CEO of Sun Microsystems

This is a partial transcript from Your World with Neil Cavuto, May 2, 2002, that was edited for clarity. Click here for complete access to all of Neil Cavuto's CEO interviews.

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NEIL CAVUTO, HOST: All the recent departures at Sun Microsystems (SUNW) getting a lot of attention on Wall Street these days. But CEO Scott McNealy doesn't seem the least bit worried.

Earlier, I got a chance to speak to Mr. McNealy and the most recent executive to resign, president Ed Zander, and I asked them now what happens?

(BEGIN VIDEOTAPE)

ED ZANDER, PRESIDENT, SUN MICROSYSTEMS: This guy has me finishing Q4, which is a very important quarter for us. And then Scott and I are going to work over the summer on transitioning, and then we have got a few other projects he has for me to do. So I am still committed to Sun for quite some time. This is, you know, a great family we have and I want to make sure it is successful.

CAVUTO: You have always been the short list of possible CEO possibilities. Anyones you want to name?

ZANDER: No. The only one is Sun.

SCOTT MCNEALY, CEO, SUN MICROSYSTEMS: I've got that one.

(LAUGHTER)

ZANDER: And, but that is not available.

CAVUTO: All right. Now, Scott, if it were to take at face value Ed's decision to leave, it was because you weren't leaving. Is that right?

MCNEALY: You know, I think Ed has been with us for 15 years, done an outstanding job and he's got a chance to take a little break in life. I've got to say I am a little jealous of that opportunity.

And, you know, I think the hard part right now is taking what Ed is saying at face value and believing it just because there is so much skepticism about why people leave companies and all the rest of it. But we've had these conversations for many years. Heck, it took me five years to get him to join Sun, so, you know, I think Ed has just done an outstanding job and he is doing a great job in finishing out this fiscal year and getting the transition done. And I think he is going to have a nice chance to have some downtime and he is going to come back and do something great.

CAVUTO: Given the initial reaction in the company's stock, the fact he was leaving Scott there, there was a perception out there that maybe you don't have a counterbalance now, that you were so focused on this Microsoft battle that maybe you took your eye off of the company ball. Is that true?

MCNEALY: Well, I do not really share my agenda and where I spend my time, but I do spend my time with our customers. I spend our time with our employees. I spend my time in the strategy meetings and management meetings. And, you know, people may see me on the Microsoft issue getting quoted or whatever, but people really have not understood what I am doing.

You know what? The interesting thing through all of this is the one job that has not changed is mine. You know, I think another thing people don't understand is that the staff, as of July 1, will have about 10 years of tenure at Sun on average, across the board. So yes, we lost a couple of staff and a couple of Eddie's staff, but we have got an incredibly strong team whose been there for a long time and been through the ups and downs and really understands this company and has I think proven to be the best managed computer company in the industry over the last 10, 15 years.

CAVUTO: Michael Lehman is the CFO. Larry Hambly, the executive vice president; John Shoemaker, the vice president of computer — on and on. I am just wondering whether it is a serious brain drain?

MCNEALY: Well, you should be insulted. I think these guys have done a great job of developing a really solid team under them. We work very hard on succession planning, on management development, and we have got a very strong and very broad and very deep bench. And I think they are a credit to the caliber. I mean, if these guys were not any good, then we didn't lose anything. If they were any good, then they developed great teams.

ZANDER: The other thing, Neil, I want to just point out, all four are staying with the company for some time. Nobody is leaving to go to competitors. At least two of those four had planned last year — even myself and Scott talked about last year, but we decided with the tough economic environment to stay another year and see the company through, you know, the downturn and get it back on its feet.

And that is what we have done last quarter in terms of gaining market share. So this is a great story in terms of how these executives continue to work at the company and will work throughout the summer into fall in training the new executives. So it is unlike other departures at other companies where, you know, the day they announced their departure, they are gone.

CAVUTO: Do you guys think looking collectively at the economy — and you're right both of you to say that that did not help matters any in your industry, in the industry I'm in, you name it. Do you see any signs of that picking up? All the interest rate cuts, all the talk about maybe the market might start picking up again. Any anecdotal signs at all that things are getting better?

MCNEALY: I am not going to set any expectations. I know there is not an economist who has a clue. There is nobody in Washington D.C. who has a clue despite what they say. What we do is we come in every day, see how the order backlog was and we are managing this business very tightly, very carefully and very aggressively. And we are going to basically let it happen. I do not think anybody wants to be predicting or leaving the dock too far right now you.

ZANDER: The important thing for us, as Scott Smith mentioned, is market share. And the last quarter, I think it was incredible in terms of the market share gains versus companies like IBM. And that is what counts at the end of the day, even in a down economy. So we just measure our competitors. We measure how we're doing in the marketplace.

CAVUTO: But, Ed, do you also measure then the progress that Linux is making, the progress that Dell and some of the others in the server business that these once also-rans are running?

ZANDER: Sure. We outgrew that market too last quarter. If you look at the Wintel market and you look at the Linux marketplace. By the way, we do have a Linux product at the low end of the market. But if you look at the server business and you look at all our competitors, they had considerably big down quarters, quarter over quarter, while we were flat.

So I think you have got to deal with the data. Our product line is stronger versus a year ago. Our quality initiatives, our software initiatives, our field engagement model. And I think the customer wins we had on the earnings call last quarter in these other markets is just indicative of how well we are doing. We need the economy to come back up again, but we're a stronger company than we were a year ago.

(END VIDEOTAPE)

CAVUTO: All right. Ed Zander, he's leaving. Scott McNealy, he's staying. Sun Microsystems, still hurting. The stock down again today.

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