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To: Lizzie Tudor who wrote (20124)	4/3/2004 12:27:57 PM
From: stockman_scott	Respond to of 57684

Microsoft and Sun settle their differences, agree to drive interoperability _______________________ The451 Group Analyst: John Abbott Sector: Enterprise software Report type: Market Development Date: Fri, 2 Apr 2004 Event summary Sun Microsystems and Microsoft ended their long-running feud on Friday and promised to make their respective technologies more interoperable. It's essentially good news for supporters of both Java and .NET, though there may be some hidden subtexts. The deal has been in the works for almost a year, but the timing of its closing – 4.15 a.m. on Friday morning – was hardly coincidental. Sun also announced job cuts for 3,300 of its staff to reduce costs as it heads for a Q3 loss of up to $820m. However, the Microsoft settlement nets Sun $1.6bn in cash and regular royalty payments, starting with $350m up front. Sun, in return, will pay Microsoft royalties once it incorporates Windows technologies within its systems. The deal lasts for 10 years. The 451 take What will the outcome of this wide-ranging and surprising agreement be? From Microsoft's side it takes away the immediate pain of not having Java support built in to Windows, something that was causing difficulties in the marketplace and between Microsoft and its OEMs. Sun promises to release interoperability and compatibility features incrementally during its quarterly product updates. But the bigger potential gains will be longer term, between the worlds of Java and .NET in such areas as J2EE application servers interacting with Windows clients, Web services interaction and developer tools between Java and Microsoft's Common Language Runtime. Ballmer hinted that "only part of the job has been done for the developer. There's more to come." Details The unlikely sight of Scott McNealy and Steve Ballmer sharing the spotlight at a San Francisco press conference on Friday was the result of a ten-year agreement between the two to cooperate and settle all outstanding litigation. Microsoft has agreed to pay $700m to Sun Microsystems to resolve pending antitrust issues and $900m to resolve patent issues. It will also pay $350m in cash as an upfront royalty fee for the use of Sun technology. Sun will pay Microsoft royalties as well, once it incorporates Microsoft technologies into its server products. The crux of the deal is a technical collaboration agreement that gives both companies access to enough of each others' technology to improve interoperability, in Ballmer's words, "without giving away the crown jewels." Sun licenses Microsoft's Communications Protocol Program while Microsoft will be able to continue support for Sun's Java Virtual Machine within Windows. Sun gets Windows certification for its Xeon servers and (soon) for its Opteron lines. Technical collaboration between Java and .NET will be stepped up. But there are no plans for merged versions of Java/C# or Java and .NET. Bill Gates and Sun's Greg Papadopoulos are hammering out further details. Asked about his former relentless anti-Microsoft stance, McNealy said: "There's been an equal amount of rhetoric going back and forth, mine was just more clever." Competitive landscape Sun and Microsoft are both under pressure: Sun from its shareholders for its recent financial performance, leading to Friday's restructuring announcements; Microsoft from US and foreign governments over antitrust issues. The announcement, timed to mitigate Sun's bad news, was somewhat reminiscent of Microsoft's equally surprising $150m investment in Apple in 1997, which some interpreted as a move to deflect antitrust criticism. More interesting, perhaps, is the interpretation – fueled by the constant emphasis on 'respecting each others' intellectual property' during the press conference – that the deal is aimed at slowing the rise of Linux. But given Sun's considerable investments recently in building up a Linux business, that seems a bit far-fetched. More likely, the common enemy is IBM. McNealy was well aware that some would be upset. "It's about selling more Microsoft and more Sun products. The rest of the world will have to learn to deal with it," he said.