AOL in Talks to Buy Netscape

Netscape Communications Corp. today confirmed that it is in talks with America Online Inc. regarding a proposed merger that would dramatically shift the balance of power in the online world.

The discussions involve a stock-for-stock, pooling-of-interests transaction in which Netscape stockholders would receive 0.45 shares of AOL common stock for each share of Netscape common stock, according to Netscape. A merger could be worth at least US$4 billion, based on the market capitalization of Netscape.

According to numerous press reports over the weekend, appearing on U.S. television and radio programs and on online versions of the Wall Street Journal and Newsweek magazine, Sun Microsystems Inc. also may be involved in the deal.

Sun, AOL and Netscape reportedly were in talks all week and over the weekend but have not yet reached an agreement. The companies are expected to announce today that the negotiations are continuing.

The leaked details include AOL taking over Netscape's Web portal, "Netcenter," as well as the company's popular Web browser software. Reportedly, Sun would take over the enterprise side of Netscape's business and pay AOL a fee for using Netscape technology. Netscape currently sells a number of business applications, including those used for messaging, groupware, and electronic commerce applications.

The deal would mean that AOL would retain the Netscape brand name and would not involve any staff layoffs, according to the reports. Netscape's president and chief executive officer, James Barksdale, has reportedly been offered a seat on AOL's board of directors as part of the deal.

The deal could have far reaching effects on the U.S. Department of Justice's antitrust case against Microsoft Corp., now being tried in court, as well as change the landscape of the "browser wars." The Justice Department is charging that Microsoft tried to drive Netscape out of business.

Sources familiar with the deal reportedly said that the acquisition of Netscape would put AOL in a position to get a huge amount of electronic commerce on the Web. AOL has some 14 million subscribers, while Netscape's Netcenter gets about 20 million visitors per month.

Analysts see AOL, strengthened by Netscape's technology and users, as a potential threat to Microsoft's growing e-commerce ventures.

The deal likely would need approval from government regulators.

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