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Sun Microsystems and Microsoft announced a legal settlement and plans for technology cooperation on April 2, 2004. On that same day, Sun separately announced plans to cut approximately 3,300 jobs and restructure its property portfolio. The settlement payment was $700 million; Microsoft later reported $1.95 billion in payments across the related agreements, a broader total.
What Sun and Microsoft agreed to
The settlement agreement was dated April 1, 2004, and announced publicly the next day. It resolved Sun’s U.S. lawsuit against Microsoft and addressed related European issues. Under the filed agreement, Sun agreed to dismiss the U.S. action with prejudice after payment and, subject to the agreement’s terms, to take no further steps to participate in specified European Commission proceedings. The filed settlement agreement sets out the legal terms.
The companies also announced planned technical cooperation, including sharing identity information between Microsoft Active Directory and Sun Java System Identity Server, Windows certification for Sun Xeon servers, and future work on Java and .NET collaboration. These were planned areas of work; the announcement does not establish that every integration was later delivered. Microsoft described the agreement as a basis for cooperation while the companies continued to compete.
How much Microsoft paid Sun
The figures refer to different parts of the arrangement, not competing estimates of one payment.
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| Figure | What it covers |
|---|---|
| $700 million | Payment specified in the settlement agreement dated April 1, 2004. SEC-filed settlement agreement. |
| $1.95 billion | Total payments Microsoft reported under the related series of agreements, including the Settlement Agreement, Patent Covenant and Standstill Agreement, and Technology Collaboration Agreement. Microsoft fiscal 2004 annual report. |
So, $700 million was the settlement agreement’s specified payment; $1.95 billion was Microsoft’s reported total across the broader related agreements.
Why Sun announced job cuts and property changes
Sun presented its restructuring as a separate cost-reduction response, not as a consequence of settling with Microsoft. The company planned to reduce its workforce by approximately 3,300 people and restructure its global property portfolio. CEO Scott McNealy called it an effort to resize the company to better align its cost structure. Sun’s April 2, 2004 announcement linked the action to its costs and financial position.
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Sun’s preliminary announcement estimated approximately $475 million in total restructuring charges spread over several quarters, including about $200 million in charges in its preliminary third-quarter results. These were estimates at announcement, not the final fiscal-year accounting.
Sun’s preliminary results and later reported charges
For the quarter ended March 28, 2004, Sun preliminarily estimated revenue of approximately $2.65 billion and a GAAP net loss of $750 million to $810 million. Sun said the preliminary loss included about $350 million for an increase in the valuation allowance for deferred tax assets and about $200 million for workforce and real-estate restructuring. The figures were preliminary, as stated in the company’s April 2 release.
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Sun’s fiscal 2004 Form 10-K later reported $343 million in charges associated with the 2004 restructuring plan: $215 million for workforce reductions and $128 million for excess facilities. The filing described a plan that included at least 3,300 workforce reductions, facility exits, productivity initiatives, and other expense reductions. This fiscal-year total and breakdown are a later accounting measure, distinct from the earlier estimate of approximately $475 million in charges expected over several quarters. Sun’s fiscal 2004 Form 10-K provides the reported figures.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Why the announcements were linked in the news
The settlement and restructuring landed on the same date, making them a striking pair of corporate announcements. But they addressed different matters: Sun and Microsoft settled litigation and outlined planned technical cooperation, while Sun separately sought to reduce costs through workforce and property changes. The date connects the stories; it does not show that one caused the other.
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