Sun

(SUNW) - Get Report

says it isn't so.

Executives from the server giant were busy doing damage control Thursday afternoon, calling reporters to tell them that no, Sun Microsystems is not going to bundle software from its

iPlanet

subsidiary with its popular Solaris servers, as news reports had indicated. (iPlanet is jointly owned by Sun and

AOL Time Warner's

(AOL)

Netscape

unit.)

Of course, Sun had to say that, because it doesn't want to alienate its partner -- and sometime competitor --

BEA Systems

.

The reports of Sun's plans to bundle iPlanet's application server with Solaris wreaked havoc on shares of BEA in the last two days, because Solaris is the primary deployment platform for BEA's own WebLogic application server. After closing at $33.75 Tuesday, BEA has dropped more than 22%, closing Thursday at $26.19.

Increasing competition between the companies on the software side could drive BEA to look for another platform partner, such as Sun competitors

Hewlett-Packard

(HWP)

or

IBM

(IBM) - Get Report

.

None of that, though, is going to happen, if you follow the company line at Sun.

"It was a misunderstanding, or at least an exaggeration, of where we're heading," says Andy Ingram, VP of marketing for Solaris at Sun. "It certainly was a surprise to us that we had suddenly changed our strategy. But these things happen, so that's why we're making the effort to put out the right message."

As a rule, software is written in layers, with different layers performing different tasks. An application server is a relatively low-level layer of software that takes care of mundane tasks, such as connecting a commercial Web site's home page with the database that sits behind it. It sits on top of an operating system, like Solaris, which is on a physical machine that is also referred to as a server.

Ingram says Sun has been sending out a developer's copy of the iPlanet application server with each new Solaris unit for about a year, to allow software programmers to develop applications for it if they chose. But if they want to run those applications, they still would have to buy a license for the full-scale production version of the iPlanet software.

"At iPlanet, we see the applications server market as a significant revenue opportunity," says Wes Wasson, VP of product marketing for iPlanet. "There is certainly no announced intention here of cutting that off and giving the product away for free."

Of course, the initial story on the situation at Sun, published in technology trade magazine

InfoWorld

, didn't say the company would give the software away for free, just that it would bundle Solaris and iPlanet together. And why not? Sun's servers would be a natural platform to move that software. The article quoted iPlanet manager Patrick Dorsey as saying "Companies buying Solaris are looking for an application server on top of Solaris. The trend is clear. ... I think it's something the customers are demanding and the industry is moving toward."

At BEA Systems, chief technology officer Scott Dietzen says that its partnership with Sun is strong, even if the two companies sometimes compete. But he didn't pass up on the opportunity to take a shot at that competition, as well.

"Truthfully, we have very little direct competition with the iPlanet applications server, and that reflects a perception in the marketplace that they've not kept pace with the level of innovation and investment that it takes to build out a full e-business platform" as BEA has, Dietzen says.

He also has no illusions as to how the situation at Sun unfolded.

"I think we were inadvertently privy to some internal debate there," Dietzen says. "I would hope and expect that the iPlanet team is stressed and that the applications server product is not doing as well, with respect to BEA, so that they would have to try to bundle it. That's our job to keep that business unit under pressure, even as we partner with the rest of Sun as an ally."

Talk about strange bedfellows.