There is surprise that such polarised positions allowed such a far-reaching declaration of peace, writes Jim Colgan, as Microsoft agrees to pay $1.6bn to its underdog rival and both pledge to make their software work better together.

At the press conference announcing a surprise alliance of long-time tech rivals Sun Microsystems and Microsoft, Sun's chief executive Scott McNealy made a minor gaffe.

Attempting a reference to both companies, he uttered the words: "I believe Sun and Microsystems..." Quickly correcting himself, Mr McNealy said: "I can't tell you how many times I've been called Sun Microsoft," to the laughter of listening reporters.

Though it was a simple mistake, and probably a mere consequence of all-night negotiations, it captured the moment for some Sun followers: The end of a decade-long vitriolic battle between an industry underdog and the world's largest software maker.

Sun, Microsoft's most vocal critic up to now, signed on to an unprecedented 10-year collaboration with its rival. Under the deal, Microsoft agreed to pay $1.6 billion (€1.5 billion) to settle long-standing legal action and both companies pledged to make their software work better together.

The announcement, made on April 2nd, ends Microsoft's longest-running individual suit and injects Sun with much-needed cash.

The benefits swing both ways, but analysts were surprised that such polarised positions could allow for such a far-reaching declaration of peace.

And following the corporate kiss, experts are questioning the fate of pending litigation since Sun has led the charge on most of the anti-Microsoft legal action to date.

Mr McNealy initiated the meeting with Microsoft chief executive Steve Ballmer, with a golf invitation.

The deal was the former's effort to move away from the sort of rhetoric that saw him dub Microsoft the "dark empire". Both companies claimed server software clients, reported frustration over lack of compatibility and this agreement is an attempt to alleviate that.

But the newfound affection doesn't hide a history of bitter litigation.

Microsoft climbed to the top of the software market on the back of the 1990s tech boom, but along with its billions in revenue, it drew a flood of anti-competitive lawsuits.

For an entire decade, the company was the target of the high-profile US government suit, which was eventually settled in 2001. Since then, Microsoft has been dogged by litigation - this is part of a determined bid to shed these suits once and for all, analysts say. "It's a hindrance for them," David Smith, an analyst for Gartner research says about Microsoft's legal wrangling.

"It shows the company wanting to move on. They have ambitions to grow in areas where they have regulators on their back," he adds.

Microsoft is vehemently proving this point. In the space of three weeks, the company settled three outstanding cases: $400 million to InterTrust Technologies, the $1.6 billion to Sun, and just this week it announced a settlement with the state of Minnesota for an undisclosed sum.

By removing Sun's legal threat, Microsoft has avoided what could have amounted to much bigger damages.

But analysts say having Sun out of its legal picture is also a milestone in the company's history. Sun formed a prominent part of the US antitrust suit and was one of the main complainants in the European Commission's case.

The Commission has indicated it is too late for this alliance to have an impact on its ruling, but Microsoft executives say the ruling and its €497 million fine now have a better chance of getting overturned on appeal.

In fact, in a statement, Sun said the recent agreement "satisfies the objectives it was pursuing in the EU actions".

Regardless of Microsoft's rationale, analysts note Sun has its own reasons for rescinding its role as vocal agitator. "Sun no longer wants to be seen just as the company that stands out against Microsoft," says Gartner's Mr Smith.

In some ways, he says, this was distracting the company, and it had become a concern for clients.

Indeed, Mr McNealy showed his attitude to this at the press conference.

"Maybe we've grown up. Maybe they've grown up. Who knows? Maybe the customers are getting more in charge these days," he said.

One issue Sun did not mention at the conference, though, was its dismal earnings results.

In the midst of the news with Microsoft, Sun said it would cut 3,300 jobs and bring in much lower revenues. Last week the company posted its fourth straight quarterly loss of $760 million.

Mr McNealy also made management changes, promoting software executive Mr Jonathan Schwarz up to president and chief operating officer.

Analysts describe the Microsoft cash injection as a means for Sun to bide time while it makes a transition.

To counter concerns the once bitter rivals are getting too close, both companies have pledged to remain fiercely competitive. Microsoft's Mr Ballmer declared, "Look, we're going to continue to compete. You're going to continue to hear from me and from our guys about why Windows servers are the best and blah, blah, blah."

But analysts say the deal also signals action against their mutual competitor - Linux. The free, open source operating system has dented Sun more than it has Microsoft, but it's expected the Windows-maker will feel the heat if Linux gains a foothold on desktop PCs.

Some analysts say the press conference included veiled threats to Linux users by repeatedly invoking intellectual property.

Microsoft's Mr Ballmer described the agreement as coming "from two companies that believe in intellectual property, that develop intellectual property and that are respecting intellectual property".

His comments echoed similar ones by Mr McNealy.

"For Microsoft, this is normal. But for Sun to be harping on about intellectual property, it has been out of character," says Al Gillen, an analyst with IDC.

Some Microsoft critics are cynical at the suggestion the company is a more co-operative player.

"What Microsoft got out of this deal was it got rid of a critic and a lawsuit that could've led to substantial damages," says Ed Black, president of the Computer and Communications Industry Association, a group involved in past lawsuits against Microsoft, of which Sun remains a member.

"A good faith act would be if you started obeying the law, not buying yourself out of trouble," he adds.

Mr Black believes with Sun no longer publicly criticising Microsoft, other companies will step in to fill the void.

With Microsoft eager to get into the growing digital media market, he says, "other companies will rise up".