Whats Next: McNealy to Kiss Gates Ring?

Will the Sun-Microsoft settlement really change the competitive landscape? Or is it just a last-ditch Sun bailout?

The initial shock is over. Sun Microsystems and Microsoft agreed on Friday to settle all outstanding antitrust and patent issues between the two, in exchange for Microsoft shelling out $1.6 billion-plus to Sun.

Now the real questions begin: Will this agreement really change the competitive landscape? Or is it simply a way for Sun—which, incidentally announced the same day that it expects a hefty loss in its fiscal third quarter and is cutting 3,300 jobs to help offset it—to get some quick cash? (Not to mention a strategy via which Microsoft effectively will hush one of the main proponents of the European Union antitrust case against the Redmond software giant?)

I, myself, cannot believe that Scott McNealy is ready to put down his hockey stick and play nice with the Redmondians. After all, Suns chairman has made a one-liner career out of attacking his Microsoft counterpart. McNealy has blasted BillG & Co. for everything from Gates decision to drop out of Harvard, to Microsofts proprietary software stack.

McNealy vs. Gates mudslinging aside, what does either party (not to mention their respective customers) really get out of this agreement, beyond a change in their balance sheets?

According to the press release outlining terms of the settlement, the 10-year pact will enable Microsofts and Suns products to "work better together"—a surprising choice of phrase, given that Microsoft has used that slogan for years to refer to its own "integrated innovation" strategy. (As in, you dont have to purchase Office 2003 and SharePoint Server both, but if you do, they work better together.)


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