Rivals Sun and Microsoft reach £2bn settlement

Posted on 2 Apr 2004 at 15:40

Sun and Microsoft have decided to bury the hatchet. The two warring companies - who have clashed over anti-trust and Java issues - have decided to reach a settlement outside of the US courts and the EU anti-trust process.

The surprising development involves entering 'into a broad technology collaboration arrangement to enable their products to work better together and to settle all pending litigation between the two companies'.

The net result, however, is a massive cash flow from Microsoft to Sun. The Redmond giant will pay $700 million to Sun to resolve pending antitrust issues, another $900 million to resolve patent issues, and an up-front payment of $350 million as a royalty payment for technologies used (the companies have agreed to pay royalties for use of each other's technology).

Areas where the companies will be working together include collaboration over Java and .NET, continuing Microsoft support for Java, Windows certification for Sun's Xeon servers and general collaboration over each other's server-based technologies. Sun has also agreed to sign a license for the Windows desktop operating system communications protocols under Microsoft's Communications Protocol Program

And as well as settling outstanding lawsuits in the United States, Sun will be withdrawing from the EU process. The official statement says: 'Sun is also satisfied that the agreements announced today satisfy the objectives it was pursuing in the EU actions pending against Microsoft.' Sun was the instigator of the EU investigation around antitrust and interoperability issues when it filed a formal complaint to the EC in 1998.

'This agreement launches a new relationship between Sun and Microsoft - a significant step forward that allows for cooperation while preserving customer choice,' said Scott McNealy, chairman and CEO of Sun Microsystems. 'This agreement will be of significant benefit to both Sun and Microsoft customers. It will stimulate new products, delivering great new choices for customers who want to combine server products from multiple vendors and achieve seamless computing in a heterogeneous computing environment. We look forward to this opportunity - it provides a framework for cooperation between Sun and Microsoft going forward.'

As for the Microsoft view, CEO Steve Ballmer welcomed the deal, also citing the benefits for customers.

'Our companies will continue to compete hard, but this agreement creates a new basis for cooperation that will benefit the customers of both companies,' said Ballmer. 'This agreement recognizes that cutting edge R&D and intellectual property protection are the foundation for the growth and success of our industry. This is a positive step forward for both Sun and Microsoft, but the real winners are the customers and developers who rely on our products and innovations.'

You can read the official declaration from both companies on the Sun website.

In a separate announcement, Sun will also be shedding 3,300 jobs - from a total workforce of 35,000. The news emerged as part of a profits warning, regarding its recently completed third financial quarter, from which it is expecting a net loss of around $800 million.

Author: Alun Williams