Sun Microsystems chief executive Scott McNealy is stepping aside after more than two decades in the top job.
Sun president Jonathan Schwartz will keep that post as he becomes chief executive, while Mr McNealy will remain chairman and a full-time employee of the Santa Clara-based company.
Sun shares rallied late last night on the news, which also included an announcement that Sun's third-quarter revenue grew by 21 per cent.
But McNealy critics, who say the 51-year-old co-founder has been slow to cut costs and make other painful changes, should not count on him ceding control, one observer said.
"Founders are not people who walk away, leaving their babies with somebody else," said Umesh Ramakrishnan, vice chairman with executive search firm Christian & Timbers. "Scott making an announcement like this is one thing and letting Jon run the company is another."
Mr McNealy and Sun hark back to an earlier era of Silicon Valley, when companies were run by their swashbuckling founders.
McNealy, one of Microsoft's most vocal critics, announced his decision as the pioneering maker of computer servers reported a wider quarterly loss.
Sun's shares surged nearly 9 per cent after the announcement of McNealy's exit. McNealy was under increasing criticism from analysts and former executives, who said he wasn't doing enough to restore the company to its more profitable days.
AP