By Eric Auchard

NEW YORK: To some analysts, it's the computer equivalent of the rapprochement between Mikhael Gorbachev and Ronald Reagan that ended the Cold War. To others, it's like competing warlords agreeing to share their spoils.

Scott McNealy -- head of computer maker Sun Microsystems and, until Friday, the most unsparing public critic of Bill Gates and Microsoft Corp. -- on Friday agreed to agreed to resolve a laundry list of grievances and make a separate peace with his archrival.

Microsoft Corp. and Sun Microsystems Inc. said they had settled all antitrust and patent litigation in exchange for cash-rich Microsoft paying nearly $2 billion in penalties and royalties to independent computer maker Sun.

It was a dramatic turnabout for McNealy and Sun, which throughout the 1990s spearheaded calls for government action against Microsoft's monopolistic behavior, but which in recent years struggled with tumbling market share as Sun's go-it-alone technology strategy isolated it from the computer mainstream.

"Two billion dollar goes a long way to healing old ills," said Martin Reynolds, a computer analyst with market research company Gartner Inc. of Stamford, Connecticut. "This is good news for businesses and consumers.... We are no longer going to see many of these petty little spats that harm customers."

Many business buyers have long been angry at being forced to choose sides in the religious wars fought between Sun's Java and Microsoft's rival technologies. Supporting Microsoft meant department-level computer systems worked smoothly. Backing Sun meant that demanding applications used to run key operations worked better, according to IDC analyst Dan Kusnetzky said.

"Business customers who rely on both found themselves in a quandary," Kusnetzky said. "This removes a tremendous amount of rhetoric and debate over the future of the industry."

Microsoft's move paralleled the reconciliation between Bill Gates and Apple Computer Inc.'s Steve Jobs in 1997, when Microsoft pumped $150 million into the ailing Apple to shore up its profitable Macintosh software franchise.

"Microsoft has had this unique capability to step away from the tactical aspects of the industry battle and seize strategic opportunities," said Roger Kay, a computer analyst with International Data Corp. of Framingham, Massachusetts. "They don't seem to get theological about business," he said.

'HAIRBALL' IN THE SIDE POCKET

For years, McNealy peppered virtually every public utterance with talk of Microsoft's "hairball" technology, a catch-all epithet for what he claimed was the shoddy reliability of Microsoft software. The attacks became personal. "At least I graduated from Harvard," McNealy once said in a jibe at Gates' decision to drop out of Harvard and design software.

The war of words was almost entirely one-sided. Chairman Bill Gates and Chief Executive Steve Ballmer rarely responded in public to attacks on the world's biggest software maker.

Kay recalled how McNealy's animosity toward Microsoft sometimes interfered with his ability to communicate Sun's own strategy. In the mid-1990s, McNealy teamed up with long-time adversary Ray Noorda to unveil a plan to create an alternative to Microsoft Windows for desktop personal computers.

"All Scott could do was talk about how evil Microsoft was and all the 'hairball' products it had created. He could not get off the 'I hate Microsoft' rhetoric long enough to talk about the benefits of an alternative to Windows," Kay said.

On Friday, at a news conference in San Francisco where leaders of the two companies appeared side by side, McNealy sought to downplay the rivalry and argued that he had begun to tone down his vitriolic attacks on Microsoft years ago.

"There's been an equal amount of rhetoric coming back the other way. Mine was just more clever," the unrepentant McNealy said at the joint press conference.

Peace talks began about a year ago, McNealy said, when the Sun chairman and chief executive called Ballmer to suggest the two play golf and patch up differences.

In a token gesture on Friday, the two sports fans exchanged Red Wings hockey jerseys, a move symbolizing their common allegiance to the winter sports franchise in Detroit, where both spent their childhoods and attended cross-town high schools.

(With additional reporting by Duncan Martell in San Francisco)

© Reuters