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From jabs to chuckles

Seemingly transitioning from adversaries to partners, Microsoft's Steve Ballmer and Sun Microsystems' Scott McNealy discuss both shtick and their mutual focus on IBM.

After years of jabbing at one another, Microsoft and Sun Microsystems set aside their punching gloves on Friday, agreeing to a 10-year deal that will see the two companies collaborating on a variety of topics and Microsoft forking over $1.6 billion to its longtime rival.

In an interview in San Francisco with CNET News.com, Microsoft CEO Steve Ballmer and Sun CEO Scott McNealy talked about the deal, what it means for competitors, whether Scott will stop making fun of Steve and who might really deserve credit for initiating the deal.

Q: What does this partnership mean for IBM?

Ballmer: We have different kinds of relationships with IBM. IBM is a customer of ours. We've done some work on Web services with IBM; Sun's done a lot of work with IBM. In the enterprise, Microsoft is a player with a growing presence; Sun is a player with a growing presence; IBM is a player. In a sense, IBM has always had the biggest presence around. We're not sure what it's going to mean for IBM. Customers are going to decide that.

McNealy: Let's be fair. We would be absolutely thrilled to death if this made (happy) the customer who wants choice--who wants a couple of vendors; not just one. We'd be thrilled to death if it were the two of us (gaining business), and IBM didn't make the short list. That's not a problem for either of us. We're OK with that. So let's just be honest about that.

Q: IBM is obviously a big competitor, if not the biggest one, for both companies. Is this going to put pressure on IBM?

Ballmer: Yes.

McNealy: We wouldn't have done it if it didn't.

Q: Why couldn't you do this, say, three years ago, when you settled the Java lawsuit?

Where we use their intellectual property, there will be a royalty stream. Where they use ours, there will be a royalty stream back.
--Scott McNealy
Ballmer: The world of 2001 was discombobulated, frankly, because of the bubble and everything else.

McNealy: Post-bubble, we were busy.

Ballmer: In a sense, the world is in a more consistent place than it was in 2001. We've had time to digest where we are. Frankly, it took somebody taking some initiative out of the box, which I complement Scott for taking last year.

Q: Scott, were you prompted by Jack Welch over another golf game, or was it all your own initiative?

McNealy: Actually, my wife invited his wife over to my house, which kind of started the conversation.

Ballmer: We have some mutual friends.

McNealy: We had a joint board member.

Ballmer: It was actually Scott's wife.

McNealy: OK, we'll blame it on her.

Q: Are we going to see an end to the shtick, to the unflattering caricatures?

Ballmer: I don't think that we are going to see the end of Scott's shtick. I don't think there's enough money in the world to do that.

McNealy: Yeah, the deal was only $100 million. The rest of it was hush money. (laughter)

Ballmer: (laughter) We'll also be talking about the positive stuff we're doing together. That doesn't mean that I don't expect to hear cracks about why their stuff is better than our stuff or to have us come out and say why our stuff is better. But we'll always have this element of cooperation, which I think is important. It changes the relationship, but I don't think it gets rid of the shtick.

McNealy: The whole idea is to make them more successful and us more successful so that we can go beat each other's brains in a little more.

Ballmer: I expect we will all sit down on a regular basis.

I don't think that we are going to see the end of Scott's shtick. I don't think there's enough money in the world to do that.
--Steve Ballmer
Actually, one of the things I want to talk to (Scott) about, before we break, is exactly how often and when the two of us get together--probably periodically. We want to get together and talk together about what we are doing for customers.

Q: From a Microsoft perspective, now that you have a maximum fine from the European Union--the dollars and cents on this--are you ready to deal with the cash question? Boosting dividend or returning cash to shareholders?

Ballmer: This is another important step forward. Of course, we'll take that up with our board and see where we go next. I don't think there is anything to announce today.

Q: Did you, Scott, basically buy yourself a key to the inside of the hair ball (McNealy's derisive term for Microsoft's proprietary software), or do we actually have some new openness that is going to make it easier for other companies?

McNealy: Where we use their intellectual property, there will be a royalty stream. Where they use ours, there will be a royalty stream back.

Ballmer: For guys like us, who have valuable intellectual property and a desire to provide jobs, it's not always just a question of what's available there to be integrated. It's really a question of, "Is there appropriate compensation for the investment we've made?" We think, now, that we have a framework. Whereas it relates to Sun and StarOffice and Solaris and Java, we've got what's fair and proper, and Scott obviously thinks that he's got the same from us. Not only today, but it's a framework that goes out 10 years and gives us the ability to continue the cooperation.

Q: Scott, are you resolved that you can play on a level playing field? Are your competition concerns totally resolved by this?

McNealy: We think we've got a great relationship and a great opportunity, but we're going to have to go execute. The opportunity is all there. I feel very comfortable that this is a fair and just kind of relationship, around which we can do technology sharing.

Before, our engineers wouldn't get near each other, because, one, our legal folks would say, "Stay away." Secondly, the teams didn't know that there was a partnership opportunity, so they didn't trust each other. Now, we've got the framework, and we've got all the pieces. The doors are wide open, and the customer demand is massive. I think we've taken down all the roadblocks.

Q: Doesn't it seem as if you're looking out from the inside of the hair ball now--because you can interoperate, but there still aren't open standards?

McNealy: I can still play with open interfaces. It doesn't stop me from everything we do in making sure that those interfaces are open, multivendor and all the rest. It's just that when I need to interoperate with a Microsoft environment, I have a mechanism to try to make that happen.