McNealy: "Complicated" Microsoft-Sun integration going slow

The integration of Microsoft and Sun Microsystems technology is progressing, but it is more complex than envisioned, according to Scott McNealy, Sun's CEO.

The companies' integration project, headed by Microsoft's Bill Gates and Sun's Greg Papadopoulos, is "way more complicated and detailed and extensive than I thought they were going to do," McNealy said.

McNealy made his comments during a press gathering held Monday at an industry conference sponsored by analyst firm Gartner.

The integration work is an outgrowth of a landmark $2bn legal settlement and technology agreement announced earlier this year by the two companies.

The work "is going well, but Bill and Greg are kind of stalling, not in a negative sense, but in the sense that they want to make sure they got it all right," McNealy said. "And they understand this is going to be one of the most scrutinised explanations of a roadmap and integration effort."

The companies were expected to offer a progress report this month, McNealy said. "I think they weren't quite ready to go show off their handiwork yet, so I hope [for one before the end of the year]," he said, adding that he and Microsoft CEO Steve Ballmer "are all over them" to deliver.

McNealy confirmed that the companies are focusing on linking their respective directory servers, Microsoft's Active Directory and Sun's Java Enterprise LDAP Directory, to provide single sign-on capabilities for companies using both servers. "It is one of many projects, but it's probably the earliest to bear fruit. I think they are going to put me and Steve on stage for [an announcement] sometime after the new year," he said.

Sun's CEO is hoping to convince top technology executives that Sun - which has struggled in recent years - is a safe bet. Sun last week reported a loss of $174m on revenue of $2.6bn for its fiscal fourth quarter, after reporting a profit in the previous quarter. The company beat analyst targets, but revenue was lighter than expected and Sun made 200 more layoffs than its previously announced 3,300.

One of McNealy's top priorities is providing more on-demand and subscription-based services. The company already provides hosted storage and use of its development tools on a software-as-a-service basis. Last month, Sun introduced a plan offering its customers grid computing for $1 per processor, per hour.

"The call plans, or subscription models, are the most interesting aspect [for Sun looking forward]," McNealy said. "The model works," McNealy told a gathering of more than 5,000 conference attendees. He said the company's dollar-based pricing for its services "is like stealing" for customers. "You don't have to own the data centre, and if you don't want it, we just shut off the IP connection," he said.

McNealy said that Sun plans to offer desktop hosting at some point, though he did not specify when. "We want to host and run your desktop on the N1 grid and let you view it with Java card authentication at so many dollars per desktop per month," he said.

Currently, Sun has 345,000 customers for its Java Desktop System, its bundle of desktop software licenced to customers for a single monthly fee. McNealy said about one-third of Sun's business is from recurring revenues, such as those generated by subscription plans.

"The bigger that number gets, the happier I am, because then I go into the quarter with most of the business done, as opposed to having to do it in the last week, because then you are under huge discount pressure and all of the rest of it."

Mike Ricciuti writes for CNET News.com