News

News Analysis: Sun-Microsoft deal: Now for the hard part

• By John K. Waters
• April 7, 2004

The surprise announcement last week of an agreement between arch-rivals Sun Microsystems and Microsoft Corp. to settle their long-running legal dispute seems to herald a new era of cooperation and enhanced interoperability between widely implemented technologies, which both firms hope can make life easier for enterprise developers.

The agreement will cost Microsoft $1.6 billion to settle all outstanding antitrust and patent issues with Sun and a $350 million royalty payment. For its part, Sun will pay royalties to Microsoft for technologies that it uses. The two companies will also work together to make their competing products interoperate which, observers agree, is not an easy task.

Speaking to reporters, Sun CEO Scott McNealy and Microsoft chief Steve Ballmer said the agreement would improve technical collaboration between Java and .NET, their competing platforms for Internet-based computing.

The cessation of hostilities between the two companies bodes well for each for different reasons, say industry experts. For longtime Sun watcher Neil Macehiter, research director at London-based Ovum, the agreement came as evidence that the Sunnyvale, Calif.-based systems company has finally recognized the need to play nice with Microsoft.

"Historically, Sun has made a virtue of pointing to Microsoft as the evil empire," Macehiter said. "In particular, Scott McNealy seemed to have a need to define everything Sun does in terms of how it's better than Microsoft. But Microsoft is part of all of Sun's customers' environments. It appears that the message has finally come across to Sun that Microsoft is part of the landscape in which it has to operate and, for Sun to be a credible player within that landscape, it needs to interoperate with Microsoft at the server and client levels. I think this [agreement] is an element of Sun growing up, perhaps even of McNealy growing up."

For Microsoft, the agreement could shore up its expected appeal of the decision issued just a week earlier by the European Commission to fine the Redmond, Wash.-based software giant a record 497 million euros ($611 million) for anticompetitive practices. Although Microsoft's Ballmer insisted that the agreement was not connected to the EU decision, it is hard to miss at least an indirect connection, Ovum's Macehiter said.

"I don't think the fact that the EU made their announcement and a week later Sun and Microsoft announced this agreement are directly related, but they are indirectly related," he said. "Microsoft can now turn around and say to the EU that there's no need to pursue legal enforcement of regulations when they have agreed with one of the main drivers behind both the EU and the U.S. litigation. Microsoft can say, 'Look, we're working together now to make our platforms interoperate.' It certainly won't harm their chances with the EU."

The implications of the agreement on the future of Sun must be seen in the context of the company's simultaneous announcement of the appointment of Jonathan Schwartz to president and COO, Macehiter added.

"Schwartz is someone who understands software," Macehiter said, "and he has already proved [with the development of Solaris 10 and the Java Enterprise and Desktop System offerings] that he can shake things up. The question is, can he take the Sun that emerges from these announcements and reinvigorate it? We don't doubt that he has the vision and brains for the job, but he's still unproven in terms of driving large-scale execution. Given Sun's history, he's going to need these skills in spades if the ship is truly going to be turned round."

And more questions remain about the implications of this agreement on Sun's Linux strategy, noted Macehiter.

"I'm sure that Sun's competitors -- the IBMs, Dells and Novells of this world -- will point fairly and squarely at this and ask, 'Where does this leave Sun's Linux strategy?'" he said. "My view is that Sun's strategy going forward is very much about Linux on the desktop and interoperability with Office in that environment, and then Solaris on the server and interoperability with the client and the Windows server platform.

"As always, the devil is in the details," Macehiter added. "There's still a fair way to go in terms of exactly what interoperability there will be and how well Java and .NET will actually interoperate. But it is something that Sun definitely needed to do."