There are only two development platforms: Java and .Net. Or so Sun chief executive Scott McNealy said at the latest JavaOne developer conference in San Francisco.

Microsoft's .Net and Sun's Java certainly dominate the market in terms of the number of developers and of new applications, and the competition between the two is unquestionably the most significant driver of software innovation.

The long legal battle between Microsoft and Sun ended on 2 April when Microsoft agreed to pay Sun nearly $2bn to settle patent and antitrust issues partly relating to Java.

But Sun still has to live with the fact that most web clients are Windows PCs running internet Explorer. Why is this a problem for a vendor of high-end server hardware and software? As Sun's chief operating officer Jonathan Schwartz said: "A server without a client is a doorstop."

The dominance of Explorer has made it easy for Microsoft to position its .Net server framework as a competitor to Sun's server-side Java platform (known as J2EE).

By some measures, .Net has now overtaken J2EE in terms of the number of web servers on which it is deployed. Since the .Net framework will not run on Sun's high-end (and highly profitable) Sparc hardware, this is surely a matter of concern for Sun.

But Schwartz barely mentioned server-side software in his JavaOne keynote. Instead, he talked a lot about mobile phones, 250 million of which have been sold with web-browsing capabilities. It seems the humble mobile is well on its way to overtaking the Windows PC as the world's most pervasive internet client.

In this market Sun has the upper hand. Microsoft's Smartphone platform has not been widely adopted, whereas many vendors have long been selling Java-enabled mobile phones. Nokia co-sponsored this year's JavaOne, showing both its commitment to Java and the importance of the mobile to Sun.

Of course, statistics can be misleading. Many people never use their mobile browser - a 2in screen does not provide a great experience. But some estimate the value of the ring-tone market at up to $3bn a year, and a single game (Macrospace's Alphawing) is reported to have been downloaded to over 1.2 million handsets.

Java's ability to mask hardware incompatibilities makes it attractive to games developers wanting their products to run on various models. It seems that 'Java on your phone' will become a thriving market, but it's some way short of being mature.

Fortunately for Sun, there are other burgeoning markets for Java. McNealy devoted a substantial portion of his JavaOne address to showcasing Sun's Java gaming initiative.

One product - the Phantom gaming console from start-up Infinium Labs - is scheduled for release in the US this November and will run both Windows and Java-based games. It should significantly boost the credibility of Java as a gaming platform.

But to achieve the ubiquity it needs to compete with Microsoft, Sun has had to give Java away for free. The small change it can pick up from selling Java consumer applications will hardly make up for the revenue it will lose if .Net gets to dominate the lucrative server-side market.

Sun may be hoping to take a leaf out of Microsoft's book and use a leading position in the growing market for internet clients in consumer devices to secure and even grow its market share on the server side, but this is not a sure thing.

The potential synergy between Java clients and Java servers is undeniable, but few applications exploit it.

In order to prosper, Sun needs to meet the .Net challenge head-on and to be fair, it does seem to be quietly stepping up to the mark. Although J2EE is generally accepted to have some technical advantages over .Net, even Sun admits the Microsoft platform is much more accessible to inexperienced developers.

But the latest release of Sun's premier J2EE development tool, Java Studio Creator, adds a multiplicity of features for simple drag-and-drop creation of highly interactive websites.

And Enterprise Java Beans, a notoriously over-complicated part of the J2EE platform, is undergoing a savage overhaul. Both of these efforts are plainly aimed at closing the usability gap with .Net.

Furthermore, it can hardly be a coincidence that the much-trumpeted 'Tiger' release of the core Java system will include support for generic types. This significant new language feature is also scheduled for release in the next version of C#, a core component of .Net).

Sun's legal settlement with Microsoft may prove to have been good news for everyone. The competition between the two companies has moved firmly back to the technology, and the struggle between Java and .Net should benefit both platforms.

This in turn should bring better software to the consumer. It is to be hoped that neither ultimately gets the upper hand.