When Sun Microsystems Inc.'s Brian Sutphin sat down with his counterparts at Fujitsu Ltd. last year to discuss expanding a long-standing alliance, the variables in play stretched well beyond the structure of the proposal at hand. Sure, the mechanics mattered. The companies were, after all, considering a complex alliance in which they would collaborate on R&D, marketing and support of a new product line based on enhanced compatibility of their operating systems. But underlying the discussion and those that followed was the baggage that inevitably piles up over a 20-year relationship.

"The biggest challenge when renegotiating an alliance is the history," says Sutphin, executive vice president of corporate development and alliances at Sun. "There are people [in both companies] who maybe didn't see things working out the way they wanted them to 10 years ago. They may want to even the score. Maybe one company's CEO has a quote in the paper that was offensive to the other company."

Issues such as these are in play nearly every time Sutphin negotiates a deal, because the counter-party sitting across the table is usually not just a potential partner but also a competitor. Fujitsu, Microsoft Corp., IBM Corp., Intel Corp., Hewlett-Packard Co., Cisco Systems Inc. - these are companies Sun goes head-to-head with for major contracts.Yet there's no walking away when negotiations get uncomfortable. Alliances are only getting more important in the information technology industry as customer demands for compatibility continue to trump vendor rivalries.

The shifting industry landscape poses particular challenges for Sun as the one-time media darling attempts to implement its growth strategy and claw its way back to profitability. Sutphin, who manages a development team of 45, works closely with CEO Scott McNealy and COO Jonathan Schwartz to develop strategies, including an aggressive acquisition campaign that's marching the company into new markets such as data storage. It's a high-visibility job that carries enormous pressure. The company's stock price continues to languish, closing at around $4 at the end of last month, down from the mid-$60 range in the boom years. Sales are flat, and Sun's strategic moves are closely watched and are often criticized by analysts and the media.

Much of the response to its pending $4.1 billion acquisition of data-storage powerhouse StorageTek, for example, ranged from lukewarm to downright chilly.

The criticism just rolls off Sutphin. "We're charged up," he says, excitedly ticking off the "huge assets of technology, people and customer relationships" that StorageTek brings to Sun. It probably helps that the pace of alliance and acquisition activity at Sun has been so rapid and the deals so varied.

In the past year, Sun has expanded or initiated new alliances with Fujitsu, EMC Corp., IBM, Microsoft and NEC Corp., to name a few. In the past three months alone, it announced the StorageTek deal, the largest in company history, and the acquisition of network integration specialist SeeBeyond Technology Corp. for $387 million.

"At least for the next quarter or so, we'll focus on digestion of what we've bitten off," Sutphin says. Unless, of course, something changes. "I could turn on my computer in the morning, look over the announcements of the last 12 hours and see something that suggests it might be a good time to talk to a third company about a relationship that might have some connection to an announcement that our competitors made," he says.

In this business, history gets written pretty fast. - Suzanne Stevens

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