Microsoft and Sun Microsystems Enter Broad Cooperation Agreement; Settle Outstanding Litigation

Ten Year Agreement Sets New Framework for Industry Cooperation; Reduces Cost and Complexity for Customers

SAN FRANCISCO, CA -- April 2, 2004 -- Microsoft Corporation (NASDAQ: MSFT) and Sun Microsystems, Inc. (NASDAQ: SUNW) today announced that they have entered into a broad technology collaboration arrangement to enable their products to work better together and to settle all pending litigation between the two companies. The companies have also entered into agreements on patents and other issues.

"This agreement launches a new relationship between Sun and Microsoft -- a significant step forward that allows for cooperation while preserving customer choice," said Scott McNealy, chairman and CEO, Sun Microsystems, Inc. "This agreement will be of significant benefit to both Sun and Microsoft customers. It will stimulate new products, delivering great new choices for customers who want to combine server products from multiple vendors and achieve seamless computing in a heterogeneous computing environment. We look forward to this opportunity -- it provides a framework for cooperation between Sun and Microsoft going forward."

"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, chief executive officer, Microsoft. "This agreement recognizes that cutting edge R&D and intellectual property protection are the foundation for the growth and success of our industry. This is a positive step forward for both Sun and Microsoft, but the real winners are the customers and developers who rely on our products and innovations."

The agreements involve payments of $700 million to Sun by Microsoft to resolve pending antitrust issues and $900 million to resolve patent issues. In addition, Sun and Microsoft have agreed to pay royalties for use of each other's technology, with Microsoft making an up-front payment of $350 million and Sun making payments when this technology is incorporated into its server products.

The agreements signed today include the following elements:

• Technical Collaboration: The Technical Collaboration Agreement will provide both companies with access to aspects of each other's server-based technology and will enable them to use this information to develop new server software products that will work better together. The cooperation will initially center on Windows Server and Windows Client, but will eventually include other important areas, including email and database software. For example, one of the important elements of large scale computing environments is software to manage user identities, authentication and authorization. As a result of this agreement, Sun and Microsoft engineers will cooperate to allow identity information to be easily shared between Microsoft Active Directory and the Sun Java System Identity Server, resulting in less complex and more secure computing environments.
• Microsoft Communications Protocol Program: Sun has agreed to sign a license for the Windows desktop operating system communications protocols under Microsoft's Communications Protocol Program, established pursuant to Microsoft's consent decree and final judgment with the U.S. Department of Justice and 18 state attorneys general.
• Microsoft Support for Java: The companies have agreed that Microsoft may continue to provide product support for the Microsoft Java Virtual Machine that customers have deployed in Microsoft's products.
• Windows Certification for Sun Server: Sun and Microsoft today are announcing Windows certification for Sun's Xeon servers. In addition, the Windows certification process for Sun's Opteron-based servers is moving forward.
• Future Collaboration for Java and .NET: Sun and Microsoft have agreed that they will work together to improve technical collaboration between their Java and .NET technologies.
• Patents and Intellectual Property: The parties have agreed to a broad covenant not to sue with respect to all past patent infringement claims they may have against each other. The agreement also provides for potential future extensions of this type of covenant. The two companies have also agreed to embark on negotiations for a patent cross-license agreement between them.
• Legal Settlements: The two companies are settling and terminating their lawsuit in the United States. Sun is also satisfied that the agreements announced today satisfy the objectives it was pursuing in the EU actions pending against Microsoft.

Press Contacts:

For Microsoft:

For more information, media only:

Rapid Response Team, Waggener Edstrom, (503) 443-7070, rrt@wagged.com

For more information, broadcast media only:

Media Relations, Global Communications & Television, (212) 339-9920, mediarelations@gctv.com

For more information, financial analysts only:

Curt Anderson, Microsoft Investor Relations, (425) 706-3703

For Sun Microsystems:

Debbie Walery
650-786-8075
debbie.walery@sun.com

Lisa Poulson
650-868-6590 (cell)

About Microsoft

Founded in 1975, Microsoft (Nasdaq "MSFT") is the worldwide leader in software, services and solutions that help people and businesses realize their full potential.

About Sun Microsystems, Inc.

Since its inception in 1982, a singular vision -- "The Network Is The Computer" -- has propelled Sun Microsystems, Inc. (Nasdaq: SUNW) to its position as a leading provider of industrial-strength hardware, software and services that make the Net work. Sun can be found in more than 100 countries and on the World Wide Web at http://sun.com

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