Sun and Microsoft Kiss and Make Up

Opinion: With a lump sum payment, Microsoft and Sun bury the hatchet and decide to focus on real threats. Weird, isn't it?

Disclaimer: IBM, HP, and Microsoft are all current clients of mine.

In what has to be a section out of "News of the Weird" Sun and Microsoft today announced they had settled and would cooperate going forward. What is particularly amazing is that some Sun products will now begin to run Windows platform offerings. The sub-text of this is that both have finally recognized that neither is actually a real threat to the other anymore and that both face much more potent threats elsewhere.

Benefits to Microsoft: I believe that this will remove much of the reasons behind the recent the European Commission decision against Microsoft. I also think it will help Microsoft in the next phase here. The company can argue that it has now settled with the party that brought forth the complaint. This also gives Microsoft access to Suns intellectual property which might lead to Redmond building new Java tools.

Microsoft always had what I considered the strongest Java tool set. Ive always found it odd that by leaving the market Microsoft hurt itself as much as the Java market. Now Microsoft has turned Sun from a competitor into a partial partner. Could anyone have thought this possible yesterday? Not me.

Benefits to Sun: Sun gains cash, which they desperately need, as they are forecasted to report a loss of around $800M for the third quarter. The company also just laid off 3,300 employees, one of many successive layoffs. These ongoing work force reductions typically destroy company moral and productivity. The combination of the agreement, the money, and these steep cuts, now lets Sun management create a credible story about moving the company decisively to new growth. Sometimes just a plausible story can be enough to drive the employees into a self-fulfilling prophecy.

Internally, Sun employees started seeing the fight with Microsoft as counter strategic and indicative of the need for a new CEO. This should do a lot to create faith between Sun employees and the executive team.

The Life of the Agreement Based on past history, Id be skeptical about whether this agreement would stick. A prior settlement between the two companies on Java didnt end well, and this one could easily be headed to the same scrap heap. But it wont, because of one thing: Linux.

Both companies face an increasing threat from this emerging platform. Much of the pain Sun now faces can be tied directly to customers migrating to Linux. Microsofts growth has also slowed sharply as companies stop migrating servers from UNIX to Windows, and move from UNIX to Linux instead. In the spirit of "An enemy of my enemy is my friend", both firms may now be on the path towards a lasting partnership.

One potential spanner in the works: Suns CEO Scott McNealy. Hes been on an almost religious quest to put Microsoft out of business. This has been very personal and often when its been fought at that level, CEOs find it hard to adjust. Its just too easy to fall back on old habits and forget the landscape has changed.

However, Scott actually initiated this agreement, which suggests he has changed his views. That gives strength to this pact, especially when compared to the previous Java agreement..

Because of all these factors, I really do see a significant chance for success this time.

Next page: The Future: Will Sun Rise or Set.