In brief: Sun, Microsoft bury the hatchet

Also: Outsourcing lowers inflation, report says; Dow Jones boots AT&T, welcomes Verizon; IT spending on the rise; and more

• Archrivals Sun and Microsoft  last week buried the hatchet by settling their legal disputes and agreeing to share technology. Microsoft will pay Sun $1.6 billion to resolve Sun’s patent and anti-trust claims and agreed to pay $350 million in royalties for access to Sun technology. Sun agreed to make royalty payments to Microsoft for server and desktop technology. Most importantly for Microsoft customers, Sun has allowed Microsoft to continue to support the Java Virtual Machine that it developed and includes with its products. As part of the settlement of an earlier lawsuit, Microsoft was to end support for that product in September. The companies agreed to share server-based technology that eventually will include e-mail, database and identity management software, and improve technical collaboration between Java and .Net. Sun also announced it was cutting 3,300 jobs and would report up to an $810 million loss for the third quarter. So now that Sun CEO Scott McNealy has buddied up to Microsoft (he appeared with CEO Steve Ballmer at a press conference), where will McNealy find fodder for his speeches?

• The Information Technology Association of America, whose 375 corporate members hail from the high-tech industry, last week released a report “The Impact of Offshore IT Software and Services Outsourcing on the U.S. Economy and the IT Industry.” The study, which argues that outsourcing generates more jobs in the U.S. than it takes away, found that outsourcing generated an additional 90,000 U.S. jobs in 2003. The report says using offshore resources lowers inflation, increases productivity and helps keep interest rates low, contributing to job growth in the U.S. and abroad. The report predicts the U.S. economy will create 516,000 jobs over the next five years with global sourcing, but only 490,000 without it. Of these 516,000 new jobs, 272,000 will go offshore and 244,000 will remain onshore. ITAA President Harris Miller said U.S. IT workers should get government assistance when their jobs are displaced by foreign operations, including skills training, job search and relocation allowances, transportation, childcare and health assistance.

• AT&T  CEO David Dorman told a crowd at the Gartner Symposium last week that right after he signs the deal selling AT&T Wireless to Cingular, he will re-enter the market, “probably the next day,” as a mobile virtual network operator and resell services under the AT&T name. Dorman said “enterprise customers in this country are the most inefficient buyers of wireless service in the world. You use expense reimbursement as a way to buy wireless service. An employee buys wireless and turns it in on an expense report . . . so you’re buying wireless as an entity of one. There are lots more creative ways.” He wouldn’t elaborate, but you can guess where he’s going.

• Speaking of AT&T, Dow Jones announced last week it is booting AT&T from its illustrious Dow Jones Industrial Average and swapping in Verizon . The change is scheduled to take effect April 8. AT&T, a member of the index since 1935, is a $34.5 billion company, while Verizon is a $68 billion company. The index was last changed in 1999.

• Forrester Research last week increased its 2004 IT spending forecast from 4% to 5%, saying spending should increase from $739 billion in 2003 to $776 billion this year and potentially $825 billion in 2005. “Companies are taking the wraps off their checkbooks,” said Andrew Bartels, a vice president at Forrester. An interesting side note: Forrester predicts IT salary and benefits will rise only 2% this year, from $200 billion to about $204 billion.

• Continuing to move beyond its database roots and into mobility software, Sybase last week announced plans to buy device management company XcelleNet for $95 million. Sybase will fold XcelleNet into its iAnywhere Solutions subsidiary, the same place it put past acquisition AvantGo, a maker of mobile enterprise software.