AOL, Sun, Netscape stress friends, not enemy

The new Internet triumvirate of America Online (AOL), Netscape Communications and Sun Microsystems downplayed the suggestion that their unity represents a new bloc to oppose Microsoft, preferring to stress the combined value they bring customers in the red-hot online marketplace.

AOL announced on Tuesday that it will buy Netscape in a stock-for-stock deal worth $US4.2 billion, and will also partner with Sun to develop the next version of Netscape's software clients and build Internet devices using Sun's Java programming language.

AOL will continue to offer Microsoft's Internet Explorer to its AOL online customers, Steve Case, chairman and chief executive officer of AOL, said on Tuesday. Netscape's Navigator browser is locked in battle with Microsoft's Internet Explorer, and some observers had speculated that an AOL/Netscape deal could eject Explorer from AOL's offerings.

But Case said it would not. "Our present intention is to continue with IE so we'll be bundled with Microsoft," he said. Asked whether Microsoft might be inclined to stop bundling AOL, Case said that Microsoft could not elect to discontinue the bundle. "It's at our option, not Microsoft's," he said.

Under the terms of AOL's deal with Netscape, Netscape stockholders will receive 0.45 shares of AOL common stock for each share of Netscape stock, according to a statement from AOL.

AOL and Netscape officials ducked the question of layoffs but were more forthcoming in outlining some organisational changes which will occur. Netscape will retain its Mountain View, California headquarters, in keeping with AOL's multiple-brand strategy, but Jim Barksdale, Netscape's president and chief executive officer, will cease his day-to-day responsibilities for Netscape, they said. Barksdale will join AOL's board of directors after the deal closes, and Netscape will be headed by Bob Pittman, president and chief operating officer of AOL, who will remain based in Virginia, officials said. The role of Marc Andreessen, Netscape's co-founder and chief technology officer, is still being worked out, but he will have a position in the AOL organisation, they said.

Barksdale rejected the proposition, at the announcement, that the looming spectre of Microsoft forced Netscape into AOL's powerful arms for protection. Microsoft is currently fighting the US Department of Justice's (DoJ) contention in a US court that Microsoft unfairly used its position as a monopoly to steamroll over its competition, including Netscape.

"Netscape is doing this because it's what's best for Netscape," Barksdale said. "This is not about the DoJ case."

But the cooperation between AOL, Netscape and Sun is very much about Microsoft. Scott McNealy, Sun's president, chief executive officer and chairman, did not hesitate to trumpet the new life he said the deal will bring to Java, the Sun programming language whose platform-independence once appeared poised to break Microsoft's tight grip on the desktop.

"I think this is a very positive server-side endorsement (of Java and) it's also a pretty big win on the client side," McNealy said.

AOL and Sun will jointly develop Internet devices using Sun's Java programming language to access AOL's services and AOL will use Java in its e-commerce offerings, AOL officials said. The three-year development and marketing agreement means that AOL will buy systems and services from Sun worth $500 million at list price through 2002, AOL said. For its part, AOL will receive more than $350 million in licensing, marketing and advertising fees from Sun, AOL said.

The agreement also calls for the partners to jointly develop the next versions of Netscape's Navigator and Communicator software clients, and AOL will offer Netscape client software to its users, downloadable from the Web using AOL's ICQ instant messaging capability, AOL's Case said.

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