Microsoft and Sun bury the hatchet; Sun cuts workforce

At 4:15 a.m. last Friday, Steve Ballmer, CEO at Microsoft Corp., and Scott McNealy, chairman and CEO at Sun Microsystems Inc., agreed to bury the hatchet after many years of hostility.

A new era of cooperation with enhanced interoperability between software products was announced at a Webcast press conference featuring the two sometimes bitter rivals. The event came just a few hours after Sun announced it was slashing its workforce by 3,300 employees and named Jonathan Schwartz as president and COO reporting to McNealy. At the news conference, McNealy refused to answer questions regarding those layoffs.

Customers with both Sun and Microsoft installations, and the developers who work for them, are the key beneficiaries of the new agreement, Ballmer and McNealy said as they sat casually on stage in director's chairs at the Palace Hotel in San Francisco.

Ticking off the three key benefits of the agreement, Ballmer said it first ends the private anti-trust lawsuit between Sun and Microsoft dating back to 1997 with Microsoft agreeing to pay Sun $1.6 billion. Second, it puts in place a framework protecting each company's patents while allowing for the sharing of information. Third, those two agreements will make it possible for greater interoperability between software from the two companies.

McNealy said that as a result of the just-signed technology collaboration agreement, IT customers and developers can expect on-going quarterly announcements of interoperability enhancements. He predicted that Sun Solaris will increasingly work better with Microsoft Windows and that Sun's Java technology will work better with .NET.

Bill Gates, Microsoft's founder, chairman and chief software architect, and Greg Papadopoulos, Sun's CTO, are already working together on interoperability issues, according to McNealy and Ballmer.

Despite the cooperation, both Ballmer and McNealy said there are no plans to merge software into a single product, and they said both companies will continue to compete in the marketplace. But in their kinder, gentler rivalry, customers will benefit from the improved interoperability, noted McNealy.

"This is all about helping customers who buy products from Sun and Microsoft," Ballmer agreed.

It is also about competing with IBM and the vendors supporting the Eclipse open-source Java IDE, according to Tony Baer, president of onStrategies Consulting, New York City.

"Microsoft aligning with a weakened Sun is a way to counterbalance its informal alliance with IBM in Web services standards," Baer said. "For Sun, we believe that the .NET framework could enable Sun to eclipse Eclipse, the IBM-funded open-source Java framework that until now has crowded Sun out of the developer market for the technology that it invented."

Baer said the Sun-Microsoft agreement makes sense for both companies at this time.

"In an era of tougher IT markets," he said, "customers don't have the patience or bucks to pay for overlapping technologies because of arbitrary platform incompatibilities."

At the press conference Sun's McNealy said he had been hearing customers urging Sun and Microsoft to "stop the noise and start the collaboration." He said that led him to phone Ballmer, a friend since the two were in high school together in their native Michigan, and invite him to play golf about a year ago. The golf game ended with the two losing to an un-named duo but began the negotiations that led to today's agreement.

Baer at onStrategies suggested that Sun's additional announcement of the promotion of Schwartz -- a known pragmatist -- to be Sun's new president and COO, also points to an improved strategy at the company.