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April 15, 1994

SYBASE, MICROSOFT EXPLAIN AWAY DIVORCE

By CBR Staff Writer

Sybase Inc, Emeryville, California and Microsoft Corp, Redmond, Washington have held an emergency press conference in London to quash rumours that the ending of their seven-year licensing deal was a divorce. Previously, Microsoft licensed Sybase’s SQL Server relational database engine for OS/2. Now Microsoft will sell and develop its own NT-based SQL Server, based on code from Version 4.2 of Sybase SQL Server and will develop further products using this code. Sybase will proceed alone with its System 10 version of SQL Server for NT, which is in beta test now to ship in the third quarter. Sybase’s version is designed to hook into the other components of its System 10 suite of database products and utilities. Following the move, Sybase will still be a Microsoft reseller and will be able to sell Microsoft’s NT Advanced server as a complement to System 10. The two companies have also agreed to make their respective versions of the SQL Server product compatible in future, using the Transact-SQL language and a common set of application programming interfaces. Both firms say that they were forced to rearrange their relationship in the light of Microsoft Windows NT, but were emphasising the positive nature of the deal. The Wall Street Journal disagreed, quoting analyst Bobby Cameron from Forrester Research Inc, who called the move …a divorce, and it is a very painful one.

Therapy

Neither Microsoft or Sybase would deviate from the line that the deal was therapy, rather than divorce, and that now we’ll be having our children in different ways, according to Sybase North European marketing director John Spiers. Sybase had been collecting 5% of its revenue as royalty from the deal, amounting to only $20m on its 1993 turnover of $426.7m. It’s possible that the firm could have initiated the split, because of discontent over this figure. Sybase originally needed a marketing vehicle for SQL Server, which Microsoft provided. Now that it has its flagship System 10 suite almost ready on NT, Sybase may have decided that it does not need Microsoft anymore – it still gets a royalty agreement from Microsoft SQL Server sales, for what it’s worth. From Microsoft’s point of view the deal is a plus because it will be able drastically to undercut Sybase’s System 10 SQL Server for NT, without worrying about Sybase withholding technology from it in revenge. Current pricing places the Microsoft version of SQL Server for NT at roughly UKP250 for a single user version, while the Sybase version, with support and services, costs some UKP2,000 plus a 7.5% annual maintenance fee, and technical support costs some UKP2,000. The question is, can System 10 draw enough loyalty from within the database market to warrant that much of a premium? Sales of Windows NT itself are also important. If no-one is buying NT because of Microsoft’s cloudy marketing message, then even if Microsoft squashes Sybase on NT, it will have a large percentage of an insignificant market. Alternatively, Sybase SQL Server System 10 users can use it on a variety of different operating systems, including Unix, making SQL Server on System 10 a more suitable – but much more expensive – product for heterogeneous environments. Perhaps the most recent contract for Sybase is a sign of things to come: the company sold SQL Server and mainframe communications products to Bank of Scotland Plc for $1m.

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