Q&A: Ballmer, McNealy Tout Landmark Tech Pact

Microsoft CEO Steve Ballmer and Sun Microsystems Chairman and CEO Scott McNealy on Friday spoke with the press about the landmark 10-year technology-sharing pact the two companies signed, ending a long-standing technology and legal feud. Below are excerpts from the question-and-answer session with the press.

Q: What were the patent issues between the two companies? Are we going to see a merged version of Java and C Sharp?

Ballmer: We haven't any kind of patent regime between our two companies. We are both big developers of intellectual property. We both own lots of patents. In a sense, it seems it was impossible to create a technical collaboration framework without having some framework in which both companies could be assured that they have got the right protections looking back and forward with respect to the other's intellectual property. That I would say probably took our legal teams as much time as [anything else] so that we could do the things that were necessary: licensing one another's protocols, etc., to get the kind of technical collaboration that this agreement contemplates.

McNealy: We shouldn't say never. But there is no plan to merge C Sharp with the Java language or .Net with the Java Web services architecture. But we are going to work hard to find ways [to work together] in the appropriate manner. In fact, [Microsoft Chairman and Chief Software Architect] Bill Gates and (Sun Executive Vice President and CTO) Greg Papadopoulos have been meeting on a regular basis for many months now to go drive the appropriate interoperability/compatibility frameworks that allow the two architectures to work in a much more seamless way than they would do had our technical teams not been allowed to collaborate. This framework now sets up that framework and makes it very clear how the issues are handled going forward.

Ballmer: There is a level of interoperability I think we both know people want. I actually think with this agreement announced there will be more customer feedback that will help Greg and Bill shape exactly what else customers might want in terms of the way they target our .Net platform as well as Sun's Java platform.

McNealy: Make no mistake about it. There is nothing about this agreement that would upset us if it resulted in people buying more Microsoft and Sun equipment than they normally would have. We have no issue with that. I don't think you have a problem with that. I don't think we have a problem with that. And the rest of the world will have to deal with that. That is part of the motivation here.

Q: Do you believe Microsoft's behavior has changed? And there is a corollary: Do you think as part of this Java Desktop, Windows and Office and StarOffice will interoperate?

McNealy: They do interoperate. And this just provides an opportunity and a framework to provide server-to-client, server-to-server, Solaris and Windows and Microsoft and Sun clients talk to those servers, to provide a higher level of interoperability and compatibility going forward while respecting each others IP [intellectual property]. ... I think these two companies have uniquely advantaged each other from an interoperability perspective with the Solaris and Windows servers stacks.

Q: Has Microsoft's behavior, which has come up before the courts, really changed?

McNealy: You know what, I am not sure we ever asked for this kind of relationship before. So I can't speak to their behavior with respect to other people or out in the marketplace. I can tell you the behavior and relationship [between Sun and Microsoft executives] has been with a high level of professionalism, a high level of respect and integrity throughout the whole conversation. Maybe we have grown up. Maybe they have grown up. Who knows? Maybe the customers are getting more in charge these days, which is kind of what I think is happening: The customer is in charge. If we don't pay attention and listen to them, [we will lose]. I challenge you all to go seek out a large number of customers who are really unhappy with this deal. I think there might be a couple of competitors who are a little shaky on it, but that is probably a good thing.

Q: Can you give us a fly-on-the-wall impression of that first phone call to Steve that led to the golf match, and who won?

Ballmer: We were partners. We lost. And I have to say, I don't have the lower of the two handicaps in this group.

McNealy: He ain't heavy. He's my partner. It was OK. We got through that. The phone call was actually very short: I just said, 'Hey, Steve, why don't we get together? Want to play some golf? Let's pick a date. And let's go do it.' It didn't take more than about two or three minutes. It's not like we haven't known each other forever.

Q: Scott, you announced some financial things as well. Were Sun's marketplace sales a driver of this? Did you feel pressure to help you in the marketplace?

McNealy: I feel pressure every day. We have been working on this forever. Literally, I think the bigger driver here was their ability to apply themselves to the issue, just because they had some other issues they were dealing with. ... I think that was actually the real driver here in terms of timing.

Ballmer: We were close in December [to an agreement]. We needed a little bit more creativity, and after we were able to kind of reapply [ourselves] there was great creativity from both the Sun team and the Microsoft team that was able to finish up the deal.

Q: Scott, you say you are listening to customers more. Does that mean there is an increased possibility that we will see Sun systems with Intel processors in them?

McNealy: We have been shipping Intel-based computers for four or five years, and we have a complete line of Intel-based products, 1U and 2U products as well as blade products, appliances for OEMs, and end users and have been running Solaris as well as Linux on those. And we have announced today that we are certifying all of those products to be Windows-ready and Windows-compatible. We also have a very quickly developing line of Opteron servers that are 64- bit x86 compatible machines.

Q: Scott, can you speak to the [3,000] job losses, particularly in the Bay area?

McNealy: No.

Q: Can you give us any detail about it?

McNealy: No. We will be working through this over the next five to six weeks on a global basis. I just don't have any details locally.

Q: How far back did the original litigation between the two companies go?

Ballmer: The two lawyers agree it was '97. I'll bet that is right.

Q: Steve, did you feel any need to do this as an outgrowth of the EU [European Union] antitrust decision?

Ballmer: I certainly do completely separate the two things. ... Sometimes there is an ebb and flow of things in a big, complicated deal like this. It is true that our capacity to focus in [was limited] as folks were involved in some other matters going on. The truth is, this is a good idea today. This was a good idea 12 months ago or so when Scott called. This would have been a good idea 12 months from now. I am thankful. As Scott points out, our customers will all be quite thankful. ... Last night at 4 a.m. just happened to be the time.

Q: Scott, does this mean as of 4 a.m. that you no longer call Microsoft a hairball or welded shut?

McNealy: I don't predict. I am going to do my best to be good. I will be good.

Ballmer: We are going to continue to compete. You are going to continue to hear from me and from our guys about why Windows servers are the best and blah, blah, blah. You are going to continue to hear from Scott and his guys about why Solaris, why Java. That is good healthy stuff. ... Customers say do these things, interoperate well, can I get the information I want back and forth, do they play together well? That is the thing that absolutely that we are agreeing to agree on. We still have other great work that we are going to compete on.

McNealy: The customers do not want us to stop competing, competing on R&D, competing on architectures, on strategies, all the rest of it. They want that choice. That is the beauty of the market economy.

Ballmer: I do think that in an environment that gets litigious, it is harder to have open discussion. I remember I saw Scott a couple of summers ago at a golf tournament. It was just hard to have open discussion because neither party knows exactly what to say and what to do. I think this is complicated stuff. Frankly, the agreements that got put in place by the teams on both sides was ... because we do both believe in intellectual property. We do both value our work. And so the question is, 'How do you interoperate without giving away the crown jewels, so to speak?' And that was an issue both for us and for Sun, I am quite sure. With the right kind of respectful environment, we spent a lot of time. It wasn't just sort of one golf game. ... There has been a number of discussions between Bill [Gates] and their CTO. ... We had a number of joint meetings with our team. We were doing weekly phone calls for, what, two months, three months last fall. It took a lot of time to not only develop the framework, but I think build a level of trust.

McNealy: And, by the way, don't underestimate the fact that we work, interoperate to a large degree already. ... We are on lots of standards bodies together. Our customers make our products work well together already. There is just a lot more we can do if we put the legal stuff behind and set up a framework around which we can do joint IP development and technology sharing.

Q: Can you talk more specifically about what you will be licensing from each other and what sort of sums of money we are talking about exchanging hands? What is the most important thing Sun is getting?

McNealy: There has been an equal amount of rhetoric coming back the other way. Mine was just more clever. And there will continue to be the rhetoric around whose product is better and all the rest of it. But one of the areas we will not argue on is around interoperability and the fact that we are both trying to solve the same problems. I feel comfortable that the tone will be the kind that the customer wants to see, the kind of competitive, 'Heh, tell me why your stuff is better than theirs?' They want to see that. ... The message here is that we are both very well-established in these enterprise customers. Everywhere we go, he is there. Everywhere he goes, we are there. There is a fairly high level in the enterprise and service provider market of near-ubiquity for both platforms. So we run into each other a lot. And it has become more and more clear that a relationship was required.

Ballmer: First, we dealt with all the old antitrust matters, just so we have a foundation. Second, we put in place what I best describe as a patent regime between the two companies that serves as a framework to ensure that we don't run afoul of one another in ways that are forward-looking that would be problematic to the technical collaboration. Third, we agreed on specific technical collaboration as it relates to how you make servers and clients talk to one another across the network. Each of these is long and detailed. ... There are things that need to get licensed in terms of making these things plug together over the network. There is a licensing framework to put in place for that. That is elements. And if you take a look at the payments, some of the money is to resolve our antitrust lawsuit, some of the payments take a look back and let's make sure we are clean with respect to one another on patents. Some of it is forward-looking in terms of how we work together from a patent perspective. And some of it is forward-looking, us to Sun and Sun to us, in terms of licensing of key intellectual property that relates to making these things plug together and interoperate well over the network.

McNealy: What you will see from Sun Microsystems is every quarter when we do our network computer launch, every quarter we'll announce another set of features or capabilities of interoperability, compatibility with the Microsoft environment. It will just be an evolution. There will not be like one product we launch. As the technical teams get at the issues, you'll see a gradual building of the portfolio of compatibility.

Q: What are your thoughts in terms of the impact on developers?

McNealy: I think this actually makes our engineering budget more productive. Without the technology collaboration, you are kind of guessing and trying to reinvent stuff and guessing at certification. And the guarantees that you can give a customer are much more tenuous. I think this will make both of our organizations more productive from an R&D perspective.

Ballmer: For the IT customer who has to put together these systems, we can clearly articulate the benefits right here, right now. From a developer perspective, we see some immediate benefits. ... Sun needs to have its differentiation to compete. We need to have our differentiation to compete. We have done part of the job we need to for the developer, but there will be more creativity that now comes out of that process.

McNealy: This is just phase one.

Tweet

   

More Channel Programs