Oracle Corp. and Sun Microsystems Inc., perennial allies in the competition against IBM and Microsoft Corp., reaffirmed Tuesday that they will continue to work together in the development of Java applications and in marketing Oracle software.

Sun CEO Scott McNealy started Tuesday's "town meeting" session for media and employees at Oracle headquarters by dispelling rumors that the two companies might be poised to announce a merger.

But when he turned to Oracle CEO Larry Ellison for confirmation, he only heard hems and haws. "A simple 'yes' or 'no' will do," McNealy said.

"You'll see the newspapers," Ellison blurted finally before observing, "Oracle's strong preference is to do everything hostile."

But the last chance of any really significant news went out the window when McNealy reaffirmed that a merger was "not what we are here to talk about."

Instead, McNealy and Ellison announced that Oracle had agreed to license Java for 10 more years and that Oracle will support the NetBeans open-source integrated development environment for Java applications as part of its collaboration.

Click here to read why Sun introduced a program to jumpstart the distribution of its NetBeans open-source Java development platform to programmers worldwide.

For its part, Sun will bundle the Oracle database on its new line of UltraSPARC IV servers, which McNealy said will effectively enable customers to use the Oracle Enterprise Edition database on its servers free for a year if they also order it with a year of service and support.

By effectively becoming an OEM for Oracle databases, Sun is "making it simple, easy and absolutely compelling for us to be the number one platform for Oracle going forward," he said.

"We are going to bundle the server, the storage, the licensing, the support and all the rest of it into an Oracle Database package that will be unbeatable price wise," McNealy said.

He claimed the bundle would cost 25 percent less than a comparable bundle running on IBM Power series servers and would be highly competitive with Oracle running on HP servers.

Furthermore, Sun will be upgrading to the latest release of Oracle enterprise resource planning applications with the aim of running a common single-instance of the Oracle database and applications across the entire company and its most recent acquisitions.

But while the two companies have been technology allies for more than 20 years, there have been times recently when they have stepped on each other's toes.

Both executives made it clear that the agreement announced Tuesday did not mean that the companies wouldn't continue development and marketing initiatives with other vendors.

The Oracle database and applications run on virtually every significant computer platform on the market. Ellison indicated that Oracle would continue to fully support its products on Linux and on Dell servers, which are directly competitive with Sun's products.

Meanwhile, McNealy said that Sun would continue to work with Microsoft on solving interoperability issues between Windows, Solaris and Java, but he wouldn't discuss the status of these efforts in any detail.

This article was originally published on eWEEK.com.