Sun Microsystems settles with longtime rival Microsoft, announces 3,300 job cuts

Friday, April 2nd 2004, 12:00 am

By: News On 6

SAN JOSE, Calif. (AP) _ Struggling server maker Sun Microsystems Inc. reached a sweeping, $1.6 billion settlement with Microsoft Corp. and said it plans to cooperate with its longtime nemesis.

The surprise agreement was accompanied by an announcement by Sun that it is cutting 3,300 jobs and that its net loss for the fiscal third quarter will be wider than expected. The cuts represent 9 percent of its total work force of more than 35,000.

The ``broad cooperating agreement'' with Microsoft ends Sun's $1 billion private antitrust suit against the Redmond, Wash.-based software giant, which it had labeled an unrepentant monopolist.

Sun's complaints sparked the investigation that led to the European Union's recent record fine against Microsoft.

``This agreement launches a new relationship between Sun and Microsoft _ a significant step forward that allows for cooperation while preserving customer choice,'' Scott McNealy, Sun's chief executive, said in a statement.

As part of the deal, Microsoft will pay Sun $700 million to resolve the antitrust case, which was scheduled to go to trial in January 2006, and $900 million to resolve patent issues. Sun and Microsoft also will pay royalties for each others' technologies.

``Our companies will continue to compete hard, but this agreement creates a new basis for cooperation that will benefit the customers of both companies,'' said Steve Ballmer, Microsoft's chief executive officer.

Sun, once a shining star of Silicon Valley, also warned its net loss for the third quarter will be wider than expected. Sun said it expects revenue for the quarter ended March 28 to be approximately $2.65 billion. Net loss will be between $750 million and $810 million, or 23 cents to 25 cents per share.

Analysts polled by Thomson First Call were projecting a loss of 3 cents a share on revenue of $2.85 billion.