Sun Rehires Co-founder By Acquiring His Company

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Sun Microsystems went a bit out of its way to rehire one of its first employees.

During Sun's quarterly product launch at its annual analyst conference in San Francisco on Tuesday, Chairman, President and CEO Scott McNealy said the company has agreed to acquire Kealia, a Palo Alto, Calif.-based server technology firm founded by Andy Bechtolsheim. McNealy, Bechtolsheim, Bill Joy and Vinod Khosla co-founded Sun in 1982.

Welcoming Bechtolsheim back into the fold, McNealy said he was having "one of the most exciting days" he's had in a while. In fact, McNealy appeared almost giddy as he invited Bechtolsheim onto the stage, hugging him with what appeared to be wholehearted emotion.

McNealy said that at Kealia, Bechtolsheim developed next-generation servers based on AMD's Opteron processors, a strategy in line with Sun's investment in Opteron, which was a key highlight of Tuesday's product launch.

"This guy is prolific beyond anything you have ever seen," McNealy said of Bechtolsheim, who designed the original Sun workstations. "It's nice to have this guy running up the steps and lighting the torch, especially with the direction Sun is headed. I'll follow this guy anywhere."

To hear McNealy tell it, the Kealia acquisition was almost a surprise. McNealy said he was having a "founders reunion meeting" with Bechtolsheim, Joy and Khosla and asked Belchtolsheim what he was up to lately. Somehow, the result of the meeting was that "Sun bought Kealia," McNealy said. Sun didn't disclose the terms of the deal, but Kealia's 58 engineers are now part of Sun.

Bechtolsheim founded Kealia late last year after a two-year stint as vice president and general manager of Cisco Systems' Gigabit Systems Business Unit, where he led the company's move into its Catalyst gigabit Ethernet switch business.

Bechtolsheim has a history of founding companies that last just long enough to be acquired. He joined Cisco in 1996 when it acquired Granite Systems for $220 million. Bechtolsheim had founded Granite after leaving Sun in 1995. He also was an early investor in Google and Star Division, the German developer of StarOffice that Sun acquired in 1999.

After the Kealia acquisition is finalized, the company will become the Advanced Systems Technology Group within Sun's Volume Systems Products unit. Bechtolsheim will become a senior vice president and chief architect within Volume Systems Products, reporting to Neal Knox, executive vice president. Bechtolsheim also will join Sun's Executive Management Group, led by McNealy.

Much of Bechtolsheim's work at Sun will likely focus on Opteron. Sun on Tuesday introduced its first Opteron-based server, the Sun Fire V20z two-way, rack-mount server, which is due to be available in April at a starting price of $2,795.

Executives at the launch said Sun plans an entire line of Opteron servers and predicted that Opteron will trump Intel's Itanium processors because the AMD platform protects the widespread investment that many customers have made in 32-bit x86 chips.

"Itanium's fatal flaw is that the volume systems market didn't want to switch to a more expensive architecture that is proprietary, even though it claims to be an industry standard," Bechtolsheim said.

Opteron, on the other hand, extends the investment in x86 because it doesn't entail an entirely new chip architecture, as Itanium does, McNealy said.

"Itanium breaks all the investment of x86," said McNealy, who named Intel as Sun's third chief competitor behind IBM and Microsoft. "Opteron stands on the shoulders of all of the innovation of [x86]."

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