CRN is reporting that Sun Microsystems has settled all its disputes with Microsoft and entered into a broad alliance. (Sunset courtesy of XLCus.Com.)

Something like this was bound to happen. Despite Scott McNealy's brave talk at CTIA last week, he was in fact like Lee after Richmond fell. The only question was whether Gen. McNealy would surrender the Army of Northern California (Sun) to IBM or Microsoft.

To my surprise, he surrendered it to Microsoft.

Under the terms of the Sun-Microsoft agreement, Microsoft pays $1.6 billion to settle all outstanding legal issues, vice president-software Jonathan Schwartz becomes Sun COO, and Sun lays off 3,500 people while acknowledging a quarterly loss of $750-810 million. (Any similarity between this and the agreement Grant signed with Lee at Appamattox (pictured) is purely coincidental.)

What does it mean?

It means money talks. It means the most important asset a technology outfit can have is a big cash horde. (That's McNealy in happier days, from the Sun site.) It means that, in this industry, dividends are stupid. Cash, and the ability to keep generating it, are the only guarantors of independence.

This surrender is personally galling to McNealy, I know, but it was forced on him by the continuing technology recession, which despite a one-month jump in total employment hasn't ended, and looks more like the Texas Depression of the 1980s every day.

It also means that the Enterprise Space is fast becoming a duopoly with two sides to it.

One side has IBM. The other side has Microsoft, H-P, and Dell. Sun essentially becomes a software supplier to Microsoft, Java a Microsoft shop.

All suppliers -- and all customers -- must now line up on one side of this divide or the other. There is no longer a middle ground. Are you Linux? You're IBM. Are you Windows? You're Microsoft. Are you Apple? Sayonara.

For enterprise customers, it also means they can expect higher, and rising prices. A shared monopoly is going to mean that. And that's what the enterprise space has become, a duopoly.

The next competitive threat in the technology space will come from Asia, I guarantee. Once an economy exhausts itself into a monopoly or shared monopoly, the only way to upset the system is for pressure to come from outside. That's how markets work.

There's a final irony, given McNealy's staunch Republicanism over the years.

It was the Repubilcans' mishandling of this technology economy that brought you down, Scott. Think about that next time you write a check to the Bush re-election committee.