Sun shines in AOL/Netscape deal

Most stories about the recent three-way deal involving America Online, Netscape Communications and Sun Microsystems have focused on AOL's $US4.2 billion purchase of the beleaguered browser maker.

But the real beneficiary may be Sun, which has shrewdly positioned itself to capitalise on two potentially huge markets -- electronic commerce and embedded software -- while tapping into a major customer base for its Java technology.

By paying AOL $350 million, Sun gets to distribute Netscape's entire line of enterprise products, including its Web servers, e-commerce applications and client software. In short, Sun now has distribution rights to the middleware needed to enable business-to-business and business-to-consumer transactions.

"If you want to play in the open commerce market, you've got to have middleware," says John Loiacono, Sun's vice president of brand marketing. "We wanted to get into the middleware game."

The deal is a good fit because Solaris is the development platform for Netscape's CommerceXchange line of transactional application software.

For its part, AOL expects Sun's back-end expertise to help the company draw business customers that might otherwise be leery of betting their online endeavors on the consumer-oriented ISP. AOL has agreed to buy $500 million worth of Sun hardware and services for its own use and for its e-commerce partners.

Just as Sun and AOL share a belief in the future of e-commerce, the two companies see the market opportunity for Internet technology reaching well beyond the corporate desktop and home computer to embedded devices.

"The game has extended beyond the Internet to ubiquitous computing, wireless, mobile devices," says Patricia Seybold, president of Patricia Seybold Group in Boston. "It's no longer just about connecting workstations."

AOL wants to get into that game by selling "AOL devices", such as TV set-top boxes and handheld appliances. CEO Steve Case says the devices would be powered by PersonalJava, based on the Java programming language. AOL devices would be designed to run on any operating system, and would use Netscape's client software.

In return for providing the engine that propels such devices, Sun will be able to introduce Java and Jini -- its technology designed to allow "spontaneous" network computing -- to AOL's 14 million subscribers.

"This gives us an opportunity to develop broad appeal for Java and Jini," Loiacono says.

Jini will be showcased at this week's Java Business Expo in New York.