Microsoft and Sun: Making up is hard to do

Industry rivals Microsoft Corp. and Sun Microsystems Inc. signalled a new era Friday by putting aside their seven-year litigious battle and signing a 10-year technology

collaboration agreement.

About a year ago — “”At the prodding of just about every customer I met who said, ‘Cut the rhetoric, Scott. Go get interoperable'”” — Sun’s Scott McNealy said he began talking to Microsoft’s Steve Ballmer about the need for more cooperation between the two companies over a game of golf.

“”There’s no plans to merge C Sharp with the Java language or .NET with the Java Web services architecture,”” said McNealy, chair and CEO of Sun Microsystems. “”But we are going to work hard to . . . drive the appropriate interoperabilty, compatibility framework that allow the two architectures to work in a much more seamless way.””

Negotiating the deal has been “”complicated stuff,”” said Steve Ballmer, CEO of Redmond, Wash.-based Microsoft. “”We needed to, I’d say, rebuild between the companies — not just between Scott and I — a level of trust.

“”In an environment that gets litigious, it’s harder to have open discussion. Neither party knows exactly what to say, what to do.””

Microsoft must pay US$700 million to Sun to resolve pending anti-trust issues and another US$900 million to settle patent issues. The two new partners have also agreed to pay royalties to use each other’s technologies, with Microsoft making an upfront payment of $350 million and Sun planning to make payments when this technology is incorporated into its server products.

The agreement signed today also includes:

  • access to aspects of each other’s server-based technology that results in the development of new server software products;
  • Sun’s agreement to license the Windows desktop operating system communications protocols under Microsoft’s Communications Protocol Program;
  • Windows certification for Sun’s Xeon servers and the continuation of Windows certification for Sun’s Opteron-based servers;
  • future collaboration for Java and .NET;
  • a promise not to sue with respect to past infringement claims they may have against each other, potential future extension of this covenant and negotiations for a patent cross-licence agreement; and
  • settlement of the two firms’ lawsuit in the U.S., and Sun’s belief that today’s deal satisfies the objectives it was pursuing in the EU actions pending against Microsoft.

This deal helps avoid the situation of two competing future visions evolving in IT, said Warren Shiau, software analyst with IDC Canada in Toronto. On one side is a Microsoft-based, vertically-integrated stack geared towards small- and medium-sized businesses that’s trying to court large firms, he said. On the other is a Unix-based, large-enterprise environment trying to use Linux as a tool to help these vendors stay relevant with large enterprises but also move into the small and medium business solutions space, he added.

“”Here is a realization from the vendors’ standpoint that this is the reality of the market — the different stacks have got to co-exist in any complicated user environment. “”

Sun and Microsoft preferred to discuss the new spirit of cooperation rather than focus on years of discord surrounding allegations of Microsoft’s market domination. Exchanging jerseys of Detroit Red Wing hockey players, Nicholas Lindstrom and Steve Yzerman, McNealy and Ballmer emphasized a long personal relationship stemming back to their attendance at cross-town high schools in Michigan, Harvard and Stanford Business School.

“”Maybe we’ve grown up,”” said McNealy of the about-face by the two companies. “”Maybe they’ve grown up. Who knows. Maybe the customers are getting more in charge these days.””

Both said, however, this agreement won’t spell the end of their fierce competition in R&D, strategy and architecture. “”The question is how do you interoperate without giving away the crown jewels,”” said Ballmer.

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