For Sun, Microsoft Settlement Is No Joke

We may miss Scott McNealy's jabs at Microsoft, but the money from the recent settlement will inject new life into Sun, which badly needs a transfusion.

Many of us are just now coming to grips with the most serious implication of the April 2 settlement between Sun and Microsoft: Scott McNealys keynote speeches just got a lot duller.

The Sun CEO has made a career of his stand-up routine over the years, entertaining thousands with such classic zingers as calling Windows the "giant hairball"; Active Directory, "Captive Directory"; and .Net, "Dot Not" or "Not Yet." And, in case of computer crashes, "Call 1-800-CTL-ALT-DEL."

Those are some of the nicer jokes he made about the "convicted monopolist" and "Ballmer and Butthead." And McNealy didnt focus just on Microsoft but also on both Wintel Axis Powers, frequently referring to Intels Itanium as "Itanic."

Listening to those speeches, I considered McNealy a tragic figure, or at least an ironic one, because Suns recent financial situation has been no joke. The company has been losing money—$3.5 billion for fiscal year 2002—and market share in big systems.

Now, unfortunately for journalists looking for a good quote, McNealys speeches are going to be as dull as a safe-harbor statement. Thats assuming McNealy has agreed to cease and desist, which is likely, given all the handshakes and hockey jerseys exchanged April 2.

The looming humor deficit aside, the settlement looks like a win-win scenario. The bitter rivals called off all legal disputes and agreed to share technology and patents and—incredibly—work together. The money Microsoft is kicking in will inject new life into Sun, which badly needs transfusion.

The jaded observer, however, wonders how long the detente will last, quid pro quo or no. Indeed, as reporters peeled away layers of the agreement, initial suppositions had to be amended—for example, the figure of $1.6 billion awarded to Sun quickly scooted north to $1.95 billion.

"The ink is not dry yet" on the deal, John Fowler, Suns chief technology officer for software, told eWEEKs Darryl K. Taft. "This is less about what we would do and more about the idea of ceasing hostilities and exploring options. ... We just dont know yet."

Two billion dollars is a lot of money, even for Microsoft, so Im sure there will be a sincere effort on both sides to hammer out the details of what exactly constitutes technology sharing and cooperation. But given history and the ongoing Sun-Microsoft rivalry—executives from both companies stressed that competition will continue—Im not looking for seamless interoperability overnight nor in the near future, nor even in the "Longhorn" time frame.

Recall that this latest settlement was from a second suit Sun filed in 2002, after its original Java suit was settled in 2001 for $20 million. Then recall the famous August 1997 deal between Microsoft and Apple, which, at the time, was in disarray following the dismissal of most of its board. Microsoft pledged $150 million, which meant a lot to Apple at the time, as well as continued development of Office for the Mac OS, thus ensuring Mac OS users had a reason to keep buying the Macintosh. Mac fans called it a deal with the devil, and for several years Microsoft "owned" Apple. Last year, Microsoft dropped development of Internet Explorer for Mac OS, a key piece of the 97 agreement.

Sun officials probably feel they own Microsoft now because millions of dollars will be flowing from Redmond for at least the next 10 years. But what Sun does with that cash will determine whether Sun will again be a force or a mere sideline player in the enterprise. The less publicized but potentially bigger deal of April 2 was the promotion of Jonathan Schwartz to president and chief operating officer of Sun, placing the software wunderkind one step away from McNealys post. Both men agree software is what will drive growth for Sun. How much they focus on the real threats to their company—IBM and other Linux vendors, rather than Microsoft and Windows—remains to be seen.

/zimages/7/28571.gifClick here to read an interview with Jonathan Schwartz.

For the time being, itll be fun watching McNealy hold back the barbs against his new best friends. You know he is just itching to get in one more crack about "Latehorn."

Scot Petersens e-mail address is

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Scot Petersen

Scot Petersen

Scot Petersen is a technology analyst at Ziff Brothers Investments, a private investment firm. Prior to joining Ziff Brothers, Scot was the editorial director, Business Applications & Architecture,...