Expanding a three-year-old interoperability pact between Microsoft and Sun, the companies have announced that Sun has signed up to become a Windows Server OEM, selling Sun x64-based servers that come bundled with Microsoft Windows Server 2003 – although a growing percentage of Sun customers were already running Windows on Sun servers anyway.

Sun is the world’s No. 3 server seller with 13 percent of the worldwide market, according to the latest data from market researcher IDC. The deal should give a nice boost to Microsoft's server business. Sun, in return, gets the opportunity to sell more server hardware and infrastructure software. Windows Server 2003 is expected to be available on Sun servers within 90 days.

As part of the agreement, Microsoft said that it will work with Sun to ensure their respective operating systems worked well with one another's virtualization technologies. In addition, Microsoft will expand the Sun hardware and software interoperability lab built in 2004 on Microsoft's Redmond campus.