Sun Microsystems Inc. has settled its longstanding antitrust suit against Microsoft for $1.6 billion, and the two companies say that in the future they'll work together on compatibility issues.
Sun, whose server business has slowed in recent years, also announced that it is losing more money than previously expected, and it plans to cut 3,300 jobs, or 9% percent of its work force.
Under the agreement, Microsoft will pay Santa Clara, Calif.-based Sun $700 million to settle antitrust issues and $900 million to resolve patent disputes.
In addition, Sun and Microsoft have agreed to pay royalties for the use of each other's technology. Microsoft will pay $350 million up front for the use of Sun's technology. Sun will pay for Microsoft technology when it is incorporated into its servers.
Interoperability is the new focus
The companies also said that they have agreed to improve communications between their server software products. Sun said that it has already signed a license that will allow its software to interact more smoothly with Windows desktops.
Tony Iams, senior analyst with D.H. Brown Associates in Port Chester, N.Y., said the high-profile settlement illustrates that when technology companies get caught up in legal issues, they lose focus on their customer needs.
Both companies have a major interest in providing increased interoperability to their customers. The first step toward that end was ending longtime legal squabbles, Iams said.
Iams said that one day, the increased collaboration between the Unix and Windows camps could spill over into the open-source world. Sun is highly committed to Linux. Eventually, Iams explained, the company could take a leading role in ensuring that Linux interacts smoothly with Windows.
"The fact that they're not trying to sue each other allows them to have a technical dialogue," Iams said.
A mutually beneficial deal
Larry Britton, a technical consultant currently working with Aquila Inc., a utility company in Omaha, Neb., has more than 20 years of experience working in heterogeneous computing environments. He said that he thinks both companies stand to gain from cooperation.
For one thing, working better with Windows means that Sun software will also run better on Intel-based servers. Britton said that this could potentially increase the customer base for the Sun ONE Java-based Web services platform, which typically runs on Unix servers.
Britton, who admittedly is not a fan of the Windows platform, joked that Microsoft could learn to make less "buggy" software through its collaboration with Sun. "It's always nice when companies start playing together naturally," Britton said.
Terms of the settlement:
- Interoperability. The two companies will help each other develop new server software products that will work well together. Sun says the cooperation will initially center on Windows Server and the Windows client.
- Identity management. Sun and Microsoft engineers will cooperate to allow identity information to be easily shared between Microsoft Active Directory and the Sun Java System Identity Server.
- JVM support. The companies have agreed that Microsoft may continue to support the Microsoft Java Virtual Machine. This issue had been a major point of contention in recent years.
- 'Certified' label. Microsoft has given Windows certification to Sun's Xeon servers, and Sun is now seeking Windows certification for its Opteron-based servers.
- Web services. Sun and Microsoft say they will work to improve interoperability between Java- and .NET-based Web services.