[IP] Why Sun threw in the towel in Mankind vs. Microsoft
Delivered-To: dfarber+@xxxxxxxxxxxxxxxxxx
Date: Sun, 04 Apr 2004 01:32:45 -0800
From: Dewayne Hendricks <dewayne@xxxxxxxxxxxxx>
Principles are fine things to have, but only if you can afford them. With
its stock declared a 'junk bond' and finishing a terrible quarter, Silicon
Valley's leading Microsoft antagonist Sun Microsystems has now decided it
can't.
The news will have surprised the company's lawyers, who only this week
were girding themselves for the next round of litigation. It appears that
for almost $2 billion, Microsoft has bought its way out of a lot of
trouble. In truth however, both parties realized that the EU decision,
which is still pending appeal, was a watershed. Microsoft doesn't have any
more nasty surprises to face from the US, EU or States, and Sun realized
that it couldn't push any more severe penalties out of the process. What
could Sun achieve by proceeding with its 2002 lawsuit? The lawsuit asked
for $1 billion in damages; today's settlement yields Sun $700 million for
antitrust issues - less than what it wanted - and a further $1,250 million
covering patent royalties - which is more than what it wanted.
But the hardest thing for Sun to swallow will be its pride. McNealy had
presented the fight in apocalyptic terms: Mankind vs Microsoft.
Late last year in closed door hearings, Sun lawyers denounced Microsoft's
new protocol licensing program as ineffective. Now Sun has become the
biggest licensee of Microsoft protocols, giving the program credibility it
lacked. Sun had testified how Microsoft torpedoed Project Cascade - which
was based on a widely licensed piece of software from AT&T called Advanced
Server for UNIX, which was itself based on Windows source code. When Sun
wanted to buy the product outright, Microsoft broke its agreement with AT&T
and cancelled the source contract. That was illegal, of course, and AT&T
collected a cash settlement, but it has reflected the tone of Microsoft's
legal strategy. If found guilty, Redmond can always buy its way out of trouble.
Caldera picked up the Digital Research suit against Microsoft and sought
$1.6 billion in damages. DR-DOS had as much as any competitor could hope
for: a clearly superior, compatible product that cost OEMs less. In the end
Microsoft settled for $155 million damages. Clear cut cases brought by
Bristol Technology and Be Inc. were settled before they even reached the
courtroom. Microsoft's deep pockets bought the company plenty of patience.
Despite a catastrophic verdict in the Federal Antitrust trial, Microsoft
simply waited for the installation of a new regime at the Department of
Justice more interested in punishing public nudity and file sharing than
unethical business practices. When the individual States revolted at the
settlement, Microsoft simply waited until the recession induced cash crises
bought the States' attorneys back to the table. Microsoft's greatest stroke
of luck was finding an EC competition commissioner more interested in cash
than industry dynamics, and even Monti's paltry settlement may still be
undone on appeal. Through good fortune and its own green fortune, Microsoft
has seen off its severest legal threats. Although Real Networks' case is
outstanding, the chapter that began with the FTC's investigation in 1991 is
now surely over.
What does Sun stand for, now?
Meanwhile at Sun, staff will be wondering if the company, which defined
itself by its opposition to Microsoft, has a reason to exist. It's a task
for Jonathan Schwartz, Sun's COO and new Number 2. Sun's pugilism was often
characterized as cynical marketing: Sun has always punched above its
weight, and even at the height of the Internet bubble was dwarfed by IBM
and HP. But not only did executives from McNealy on down really believe
their own rhetoric, that rhetoric was largely true. Sun was the only direct
competitor in business computing that had the freedom to criticize
Microsoft, as it was the only company with an influence on enterprise IT
standards that wasn't a Windows licensee.
Let's keep things in perspective. Microsoft's unethical business
practices should be put into context. Unlike the pharmaceutical cartel or
arms manufacturers, Redmond doesn't overturn democracies or kill thousands
of civilians; unlike News Corporation it doesn't debase social discourse or
undermine language. Unlike Google, it doesn't pretend to present "all the
world's knowledge", when most of the world's knowledge isn't even on the
Internet. Microsoft simply makes some fairly mediocre software and charges
a lot for it.
But for Sun, which had rose through the ranks of a dozens similar
workstation manufacturers through foresight, engineering skill and hard
competition, Microsoft's mediocrity is an affront. Few companies can afford
Q&A disasters in their core product lines, as Sun knows when it endured a
torrid time upgrading its SunOS customers to Solaris. And huge
opportunities were lost when Sun failed to execute, such as the potential
leadership of the embedded processor market that the Java picochip
promised, but couldn't deliver. Thanks to its monopoly position Microsoft
can afford to release sloppy software and not worry about the
repercussions. This has been a very real culture clash of engineering
values. Now Sun has the job of defining what it stands for from scratch.
Microsoft's biggest global competitors are exactly as they were on
Thursday: Nokia and Sony, two companies whose core revenues don't derive
from Windows and who can set global standards. (IBM has every motivation to
fund Linux development, which Redmond really doesn't like at all, but IBM
doesn't have the inclination to set standards elsewhere and can't dictate
consensus in the OSS space). Not that it's any consolation on Sun's
Blackest Friday, but if Mankind had to be represented in an Independence
Day scenario, most people would rather it was Sun engineers downloading the
Trojan onto the alien's computers, and not Microsoft engineers.
Archives at: <http://Wireless.Com/Dewayne-Net>
Weblog at: <http://weblog.warpspeed.com>
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