Now McNealy is stepping aside as CEO, 24 years after co-founding Sun and five years after the company's agonizing downward spiral began during the dot-com bust. Yet it is not fair to blame McNealy for Sun's woes.
Sun's problem is huge and it is simple: Linux. The free operating system, yoked to low-cost processors from Intel and Advanced Micro Devices, has decimated the Unix market by offering customers a cheap alternative to pricey Unix boxes like the ones Sun makes.
Sun's top-end machines cost more than $1 million apiece and run a proprietary Unix-based operating system, Solaris, on Sun's proprietary SPARC microprocessors. But who needs those boxes when you can instead just lash together loads of cheap x86-based servers running free Linux?
McNealy could not turn back the Linux tide, any more than the Greenland icecap can turn back the effects of global warming.
Oddly enough, there was a time when Sun's downfall might have been prevented, but it was more than a decade ago, in the early 1990s. Back in those days, some engineers at Sun began pressing the company to make its operating system -- at that time it was called SunOS -- an open-source product. The idea was that by doing this, SunOS would gain a huge community of developers and supporters and become the most widespread operating system.
"I told them, 'If you want SunOS to win, then give it away,'" says Larry McVoy, a former Sun staff engineer who led the charge and even published a paper in 1993 urging Sun to open-source its operating system. (You can still find the paper online.)
Says McVoy, "If they had done what I suggested, I am 99 percent sure that Linux wouldn't exist today."
But McNealy wouldn't listen, and Linux grew and became more and more robust, with help from hardware makers like IBM and Hewlett-Packard, and startups like Red Hat and old-guard software house Novell.
Last year, in desperation, Sun announced it would release Solaris, its current operating system, as an open-source project. "The problem is, it took them 12 years to see the light," McVoy says.
McVoy, for his part, left Sun in 1994 and hooked up with Linus Torvalds, the creator of Linux. Driven to make Linux succeed, McVoy spent three years creating a software development tool called BitKeeper that let Torvalds and his worldwide band of programmers keep track of revisions to their code.
Torvalds and his team dropped BitKeeper last year, in a spat with McVoy. But the product has caught on so well that McVoy has now built a company around it. His company, Campbell, California-based BitMover, counts HP and IBM among its customers.
Sun, meanwhile, has been losing money since 2001. Its stock now trades at $5, down from $64 at its peak in 2000.