Microsoft makes $1.6 billion peace with Sun Microsystems
Rob Lever | April 2, 2004
WASHINGTON — High-tech rivals Microsoft and Sun Microsystems buried the
hatchet Friday, announcing Microsoft would pay $1.6 billion to settle antitrust and patent disputes.
Sun Microsystems Chairman and CEO Scott McNealy (L) and Microsoft CEO Steve Ballmer discussing their companies' new cooperation agreement, San Francisco, April 2, 2004.
The deal between the longtime bitter rivals came in conjunction
with announcement of a broad 10-year agreement on technical
cooperation which could help lift Sun out of its recent slump.
The peace deal marks a major shift in the tech landscape as Sun,
a major maker of software and servers, has been one of Microsoft's
fiercest critics and a force in the antitrust actions against Bill
Under the settlement, Microsoft will pay 700 million dollars to
resolve pending antitrust issues and 900 million to resolve patent
"Our customers said, 'Stop the noise and start the
collaboration,'" said Scott McNealy, chairman and chief executive
officer of Sun at a news conference in San Francisco with Microsoft
CEO Steve Ballmer.
"This is a good idea today, and it was a good idea 12 months
ago," Ballmer said. "The fact is it presents a new opportunity to
go out and work on things that are customer driven."
Separately, Microsoft will make an up-front royalty payment of
350 million dollars in a deal allowing for use of each other's
technology and Sun will make payments when this technology is
incorporated into its server products, the companies said.
The two firms agreed not to sue over past patent infringement
claims and to start negotiations for a cross-license agreement. The
deal will mean the companies will work on "interoperability"
between Sun's Solaris operating system for servers and Microsoft
Analyst Joe Wilcox at Jupiter Research said the deal, while
surprising in light of the history of the two firms, makes sense
"Microsoft is dead serious about settling every lawsuit
possible," Wilcox said in an online commentary. "Today's settlement
with Sun is perhaps the best example to date, as the two companies
are bitter rivals and have locked horns during several knockdown
Microsoft will avert a messy trial what could feature "digging
up of past behavior Microsoft is trying to forget," Wilcox said.
Sun, which makes server software that competes against Windows
server software, now "has access to broader Windows information and
an agreement that would extend to other server software," he added.
But Wilcox said it was unclear whether Sun would now join
Microsoft in lobbying the European Commission to drop its antitrust
sanctions imposed last month.
Ed Black of the Computer and Communications Industry
Association, an industry group that has been a fierce critic of
Microsoft, said the settlement was positive news.
"The enormity of the settlement is an indication that Microsoft
knew that Sun had a legitimate and strong case against them," Black
"Companies typically do not willingly hand over two billion
dollars to a rival in a settlement unless they know that they are
likely to lose. Microsoft did its best to 'pollute' Sun's Java
platform ... They are finally having to account for their
The move comes as Sun is struggling with competition both from
Microsoft and from the open operating system Linux -- and with its
market capitalization a mere shadow of its 2000 self. Sun posted a
net loss of $125 million in its most recent quarter.
Sun said at the same time it will take a total of $475 million in charges over the next several quarters as it trims 3,300
jobs. The company warned that it now expects a third-quarter loss
wider than expected, between 750 million and 810 million dollars.
"We are resizing the company to better align our cost
structure," McNealy said.
Sun shares surged nearly 21 percent on the news to 5.06 dollars
while Microsoft rose better than three percent to 25.85. –Sapa-AFP
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