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Giving Peace a Chance in Technology

By Jim Kerstetter In the 1984 comedy Ghostbusters, Bill Murray's scientist-turned-paranormal sleuth warns of an impending apocalypse, of "dogs and cats living together -- mass hysteria." So you'll have to pardon those in techdom who are unnerved by the détente reached on Apr. 2 between the dogs and cats of the computer industry -- Microsoft (MSFT) and Sun Microsystems (SUNW).

In a historic arrangement, Microsoft has agreed to pay Sun $1.6 billion to resolve pending antitrust and patent issues. Microsoft will also make a $350 million upfront royalty payment to Sun. In return, Sun will drop its domestic litigation against Microsoft. The European Union's case against the Colossus of Redmond (Sun was the original litigant in the suit) still stands, and EU regulators say they're pressing ahead (see BW, 4/5/04, "He Holds Microsoft's Fate In His Hands"). But the EU case may lose some of its starch as a result of the truce.

TWO CAMPS. Microsoft and Sun, living together, may be hard to believe. But Microsoft CEO Steve Ballmer and Sun CEO Scott McNealy sharing a stage in downtown San Francisco is good news for the tech industry and its customers. "Maybe we've grown up. Maybe they've grown up," McNealy said, with a smiling Ballmer to his side. "Maybe the customer is more in charge these days."

McNealy is right. "There were a lot of customers and shareholders who said, 'Look, this feud isn't constructive,'" says Toni Sacconaghi, an analyst at Sanford Bernstein & Co. Sun execs admit that's the case, and they realized last summer that they had to find a way to make peace.

Truth is, the squabble has made a mess of computer networks. Since the mid-'90s, the software-developer community has essentially split along two lines -- those who develop for Sun's Java platform and those who develop for Microsoft's .Net. The problem is the platforms are incompatible, and big software companies like Siebel Systems (SEBL) are forced to double their workload as a result.

PASSPORT TO LIBERTY? It's a thornier issue for customers. Because nearly every big company buys software from Microsoft and also uses Java-based software -- from such companies as Sun, BEA Systems (BEAS), IBM (IBM), and Oracle (ORCL) -- they have to spend big bucks to integrate the two. "I'm glad we can get over that," says Dale Fuller, CEO of Borland Software (BORL), which works with both companies.

A lot of the technical details in the pact have to be hashed out, even after nine months of talking between Microsoft Chairman William Gates and Sun's Chief Technology Officer Greg Papadopoulos. "The work for Bill and I is just beginning," says Papadopoulos. For starters, execs at both companies say they'll work on compatibility between Java and .Net, solving at least some of those interoperability issues for customers. They're also going to make sure their methods for identifying people using a computer network in big directories are compatible. At the moment, they're not.

The next logical step? Though Microsoft and Sun haven't decided, it would be sensible for them to make their opposing methods for tracking consumers on the Web -- Microsoft's Passport and Sun's Project Liberty -- more interactive. If they don't, they could cause the same sort of split in e-commerce they've created in software development.

WEAR 'EM DOWN. Sun is also certifying its servers to run Microsoft Windows, but it's stopping short of actually selling Windows. "I don't think Microsoft needs a new sales channel," says McNealy. Sun execs say they'll keep selling their own Solaris operating system as well as servers and PCs that run on the Linux operating system and continue to compete with Microsoft -- albeit on a more level playing field.

As for Microsoft, it will continue support for Java in its operating system. It will also do what is always has done: Year by year, wear down even its most intractable competitors. After all, cats and dogs will do what cats and dogs do, even when they're living together. Kerstetter covers tech from BusinessWeek's Silicon Valley bureau

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