Sun Microsystems has entered into an agreement with Microsoft to sell the Windows OS on its servers. This provides several gains for Sun in a server market led by IBM and HP. Microsoft gets to capitalize on Sun's market share in the server market and also collaborate in the area of virtualization technology.
Here's a quote from an article by The Associated Press:
Sun and Microsoft vowed to make sure their respective operating systems worked well with one another's virtualization technologies, a commitment that could help both companies prosper from the trend toward data center consolidation and urgent efforts by technology managers to reduce energy costs.
It's a crucial element of Sun's turnaround strategy, and a formula that Sun management said is necessary to ensure the company's long-term financial success.
Microsoft will also be collaborating with Sun (Wired) on Mediaroom, Microsoft's IPTV software platform.
In the past, Sun Microsystems was one of the most vociferous critics of Microsoft's strategies. Sun's former CEO, Scott McNealy, was well known for saying some of the most acerbic comments against the Redmond giant (BusinessWeek).
The collaboration in the virtualization front will focus on ensuring the operation of Sun's and Microsoft's OSs on their respective virtualization technologies. The partnership is an extension to Sun's plans in the server market since earlier customers were free to install Windows on their servers but they didn't receive any support from Sun.
The other angle to the collaborative partnership is a reaction to new market players such as VMware in the virtualization front.
Check out these additional news links: