In a stunning announcement, Microsoft Corp. today said it has agreed to pay Sun Microsystems Inc. $1.6 billion to resolve longstanding patent and antitrust issues.

As a result, Sun has agreed to terminate its lawsuit against the Bellevue, Wash.-based software giant that has been repeatedly called a monopolist by Sun Chairman and CEO Scott McNealy.

Meanwhile, the two longtime technology foes, in a statement announcing the truce said they have entered into an agreement to strive to make their software products more compatible.

The surprise agreement was accompanied by Sun's announcement that it is cutting 3,300 jobs and that its net loss for the fiscal Q3 will be wider than expected. The cuts represent 9 percent of Sun's work force of more than 35,000. In another Sun statement issued today, the company named Jonathan Schwartz, its executive VP for software, to the positions of president and COO.

McNealy, in a statement, said the agreement 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.

Microsoft CEO Steve Ballmer acknowledged the two companies' "cooperation" agreement, but noted the technology giants will continue to "compete hard."

As part of the settlement, Microsoft has agreed to pay Sun $700 million to resolve pending antitrust issues and $900 million to resolve patent issues. In addition, Sun and Microsoft have agreed to pay royalties for use of each other's technology, with Microsoft making an up-front payment of $350 million and Sun making payments when this technology is incorporated into its server products.

The agreements signed today states the two companies will provide both companies with access to aspects of each other's server-based technology and will enable them to use this information to develop new server software products that will work better together. The cooperation will initially center on Windows Server and Windows Client, but will eventually include other important areas, including email and database software, the companies said.

Sun and Microsoft have also agreed to work together to improve technical collaboration between their Java and .NET technologies.

By: DocMemory
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