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.
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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 Sun’s intellectual property which might lead to Redmond building new Java tools.

Microsoft always had what I considered the strongest Java tool set. I’ve 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.