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Why a new CEO is right, Wall St is wrong and America needs more jails

McNealy's exit interview

Internet Security Threat Report 2014

El Reg: Did you make this move now thinking that you might lose Jonathan?

SM: I've never tested this theory out, but I think that if I had gone into the board and said, "We might lose Jonathan, but I'm really ready to sign up for another five or 10 years of this," that the board would have been alright with that.

I wouldn't have been alright with it though. I think Jonathan is a huge treasure, and I'm tired of people swiping all of my good people to become CEOs.

El Reg: Have you handed Jonathan a healthy company?

SM: I want the new guy to get all the glory.

I took all the hits, and I think the timing is actually perfect because I am taking all these non-cash hits, so that he doesn't have to. He can start showing year-over-year growth, year-over-year earnings improvements, and reductions in the non-cash hits.

I need Jonathan to get established as a whiz kid. I think the timing is absolutely perfect.

El Reg: You guys are getting pounded more than ever by Wall Street analysts for not making more layoffs, and that doesn't look like it will change under Jonathan. It seems to us like there is an almost philosophical underpinning to your reluctance to lay people off.

SM: It's funny because I read these random articles where people say that the board is putting me under tremendous pressure and that the board is under tremendous pressure. Well, I tell you what. The guys we have on the board let that kind of pressure roll off them like water off a duck.

They know what their job is. They are stewards of the long-term shareholder value.

It's a joke, man. The pressure I care about comes from my employees, our developer community and our customers. They can apply pressure to me. If you want to see me hop to action, have one of those guys come talk to me about a problem.

I'm sorry if some guy named Tony [sic] is upset that I don't follow his advice. He's not my dad.

El Reg: Probably more than half of the folks that wish you would do things differently have similar education backgrounds with an MBA from a fancy school.

SM: I went to Harvard and to Stanford and let me tell you, there is nowhere near the diversity of thought at the major education institutions around the world that you might expect.

How can anyone with tenure teach me about capitalism? They're saying, "I have checked out of capitalism. Now I can teach you about it." They are so confused.

El Reg: There has to be a time when you're willing to layoff people though.

SM: Here's when we layoff folks. We do it when there is a better way to buy it than make it.

So far, everything everyone of my employees is doing is adding value.

Everybody is doing good stuff that's adding customer value and adding margin opportunity. In the meantime, we're spewing cash.

I don't have the same sense of urgency to go blow away customer value that someone who is trying to make a buck this quarter on the street who has no vested interest in the long-term shareholder value of this company has. I don't listen to that garbage.

We will get to GAAP profitability. We will get there in due course.

I don't want to rush and destroy the two things that are so hard to keep and that is customer faith and a strong product line.

El Reg: It always seems weird to hear a golf-major, Harvard grad with a buzz cut talk like that. Shouldn't you fit a bit more comfortably in the conservative frat boy role?

SM: I am probably a political anomaly in the sense that I am very libertarian with respect to government but not an anarchist. I believe there are roles for government around making laws, enforcing laws and defense. I believe in anti-trust, the Sherman Act and that sort of thing.

I am way into personal responsibility to the point where I would probably build a lot more jails than the normal human would. If we ran out of jails, then maybe we would have to get more extreme.

I am a raging capitalist and a flaming social liberal. I just absolutely agree with diversity.

El Reg: And a lot of this conviction carries over to your business?

SM: Yeah. Look, I've thought long and hard about this stuff and my business, and I don't care what anybody says. We're right. And that's how I live my life. ®

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