Microsoft and Sun's difficult dance

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of add-on products and services. It's also vital in fending off industry heavyweights IBM, Oracle and SAP.

Though how they will collaborate is still not exactly clear, both companies do have a strategic interest in working together, analysts said.

With corporate customers demanding that products work better together and require less custom integration work, better interoperability of Sun and Microsoft gear could give the companies a leg up against common competitor IBM. Also, the operating systems business of both Microsoft and Sun compete with Linux providers, notably Red Hat.

Establishing yourself as a long-term strategic partner for enterprise buyers makes you a survivor.

--Mark Stahlman, analyst, Caris

From Sun's perspective, having a 10-year, $2 billion partnership with Microsoft helps dispel concerns over the company's long-term viability, said Mark Stahlman, a financial analyst at Caris & Co. He noted that corporate customers prefer to work with full-service providers that can provide a full range of products, which the two companies can offer in combination.

"Everybody has gone through enough pain in the last few years, you would be foolish not to consider the possibility that you'll be out of business in five years. So establishing yourself as a long-term strategic partner for enterprise buyers makes you a survivor," Stahlman said.

Working with Sun, Microsoft could gain more credibility in selling into corporate data centers and breaking out of its roots as a desktop software provider, said Frank Gillett, analyst at Forrester Research.

But even as the two companies explore their areas of mutual interest, the full potential isn't yet clear. And with the high hopes attached to the historical Microsoft-Sun pact, it remains to be seen how far their relationship will go.

"I'm not convinced that Microsoft executives are fully bought into it," said Gillett. "But I think they are experimenting deeper than any of us would have thought."