Hold on to your hats. Sun Microsystems (Nasdaq: SUNW) and Microsoft (Nasdaq: MSFT) delivered a surprise today, announcing that they have settled their differences. Both stocks rose today on the news, as investors took the cooperation as a sign of good times ahead.
The upshot? Microsoft will pay Sun a $1.6 billion settlement fee related to the lawsuit, which was about Sun's Java software; there will be a "broad cooperation agreement" between the two longtime technology rivals. The high-profile lawsuit lodged by Sun against Microsoft has been linked to the latter company's antitrust problems -- including the recent skirmishes with the European Union.
Although a figure like $1.6 billion may boggle the mind, for Microsoft, it's not that big a deal. After all, the company sits on more than $50 billion in cash, stashed for issues such as this one. So, settling what surely has been a thorn in its side certainly calls for a bit of relief.
But what of Sun? It claims that the customer wins now. Both companies say more details are forthcoming on their "new relationship." Whatever that means, investors seem bullish now that Sun is no longer distracted by the lawsuit, nor saddled with the legal fees -- and it gets much-needed cash in its coffers. But for many investors, the most important question seems to be: Will it be able to get back to business?
Coinciding with the news of the settlement is word that Sun will cut 9% of its workers (that's 3,300 eclipsed laborers) due to continued weak sales. In fact, Sun said it's expecting to post a steep loss, as well as a 7% drop in sales. While the "new relationship" between Microsoft and Sun and the compatibility between the Java and .NET standards are good things, whether this saves the day for Sun is hardly a question with an easy answer.
However, Fool contributor Tim Beyers brought up an excellent point during discussion on this breaking news today -- the need for a kinder and gentler Scott McNealy, considering many have wondered if all the anti-Microsoft sentiment ultimately crippled Sun.
For example, think of the improved outlook for Apple (Nasdaq: AAPL) when it finally began cooperating with Mr. Softy. Compatibility between the standards did wonders for users in both the Microsoft and Apple camps, and definitely kept Apple from getting, shall we say, Betamaxed.
Sometimes, in business, one of the most important rules of survival may be to swallow one's pride and decide, "If you can't beat 'em, join 'em."
Fools are talking about the settlement and more on the Microsoft and Sun Microsystems discussion boards.
Alyce Lomax does not own shares of any of the companies mentioned.
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