NEW YORK (CNN/Money) -
Microsoft will pay Sun Microsystems a total of $1.6 billion to settle a long-standing set of legal disputes, the companies announced Friday.
Meanwhile, Sun said it will cut 3,300 jobs and take a $475 million charge as it looks to cut costs and return to profitability. The company said it will spread the charge over several quarters, including $200 million in its third quarter.
Under the settlement, Microsoft said it will pay Sun $700 million to resolve antitrust issues and $900 million to resolve patent litigation.
Sun and Microsoft have also agreed to pay royalties to use each other's technology, with Microsoft making an up-front payment of $350 million and Sun making payments when this technology is incorporated into its server products.
Sun (SUNW: Research, Estimates) also said it expects a net third-quarter loss of 23 to 25 cents a share on revenue of $2.65 billion. The loss will include approximately $200 million for restructuring of work force and real estate.
Excluding the restructuring charge, Sun sees an operating loss of 6 to 8 cents a share. In September, Sun said it expected an operating loss of 7 to 10 cents a share.
In a separate announcement, Sun said that it was promoting Jonathan Schwartz, who had been Sun's executive vice president for software, to president and chief operating officer. The COO position had been vacant since Ed Zander, now the chairman and CEO of Motorola, left Sun in 2002.
In pre-market trading Friday, shares of Sun were up nearly 9 percent while shares of Microsoft rose 1.7 percent.