Speculation over the future of Sun Microsystems reached new heights Thursday after reports that CEO Scott McNealy is poised to leave the company he co-founded 24 years ago.

If Mr. McNealy leaves—voluntarily or otherwise—the question becomes who could take his place. He’s been the company’s only CEO since 1984, two years after its founding. And lack of agreement on a new leader could keep Mr. McNealy from going anywhere.

The once high-flying server vendor saw its fortunes crash with the dot-com bust. It is scheduled to release its latest quarterly report Monday with the help of CFO Michael Lehman, who recently rejoined the company and who some believe will replace Mr. McNealy, according to unnamed sources cited in the San Francisco Chronicle.

Company president Jonathan Schwartz, known for his gregarious blogging, is another obvious candidate.

None of the executives could be reached on Thursday, and a company spokesperson said Sun “has a policy against responding to rumors and speculation.”

Sun shares rose a dime to $5.05 in recent trading, not far off a 52-week high of $5.25, but a tiny shadow of the stock’s value in 2000, when Sun proclaimed itself the “dot in dot-com” and its stock soared into the mid-60s (see Sun Feels the Heat).

“I think the whole thing is ridiculous,” said Needham & Company analyst Charles R. Wolf. “Sun has gone through tough times… but it’s in a better position to grow revenue again than it has been in years.”

Last fall, the company seemed to regain its balance at least momentarily when it released its first servers based on the kind of processors made by Intel and AMD, the so-called x86 technology that dominates the market. Called Galaxy, the servers are geared toward low-end customers that rivals like IBM, Dell, and HP have kept away from Sun (see Sun Debuts Galaxy Servers).

Galaxy and another new server, Sun Fire, which started shipping eight-core processors, were released with a big marketing splash (see Sun Fires Add Multicore Chips). But Sun sold only 20,000 units last quarter while Dell sold 350,000 similar computers.

Sun hasn’t had a profitable year since 2001. A consensus forecast of 21 analysts surveyed by Thomson Financial predicts Sun will post a loss of $0.06 per share on sales of $3.21 billion in its report next week.

Mr. Wolf believes “they need Scott’s vision” to market the new systems. “I can’t think of any candidates for the job,” he said, except, perhaps, former COO Ed Zander, who once advocated big layoffs against Mr. McNealy’s wishes and now serves as CEO of Motorola.

Sanford Bernstein analyst Toni Sacconaghi noted in The Wall Street Journal that Mr. Lehman has become the face of the company of sorts, meeting with investors both publicly and privately and is expected to present a detailed financial plan.

Others said Mr. Schwartz seemed to be a clear favorite internally. But not everyone thinks either is a likely replacement.

“I don’t believe Schwartz can run the company nearly as well as Scott,” Mr. Wolf said. As for Mr. Lehman, Mr. Wolf said his skill with numbers can’t translate into great marketing for Sun’s new products.

Greater Worries? 

Analyst Roger Kay, founder of Endpoint Technologies, said that Sun may have greater worries than Galaxy sales. He said insiders believe “massive layoffs” are on the horizon. An unusually high number of employees have been attending industry confabs, he adds, suggesting employees are circulating their resumes.

“The only reason so many people from one company would be at these bloated conferences is because they’re looking for jobs,” Mr. Kay said.

He added supply chain woes were partially to blame for low Galaxy sales—a problem attributable to poor operations management. And that could indicate challenges inherent to Sun that had better be changed if the company hopes to get on its feet, or at least make itself attractive should Sun decide to sell off divisions.

“They’ve got to get much leaner and meaner. They need an operating manager that thrives on managing a really big company, a company that thrives on vast amounts of intellectual property,” Mr. Kay said.

Some may argue that Mr. McNealy hasn’t been able to deal with these issues and so should be replaced with someone from outside the company. But Mr. Wolf warned against the grass-is-greener approach.

“Motorola’s been turned around and look who’s doing it,” he said. “A guy from Sun.”