FOCUS - AOL in talks to buy Netscape, sources say
SAN FRANCISCO, Nov 22 (Reuters) - America Online Inc
<AOL.N>. is in talks to buy Netscape Communications Corp
<NSCP.O>. in an all-stock deal, sources close to the talks said on
Sunday, in a move that would combine two of the best known
names in cyberspace and boost AOL's Internet presence.
Such a deal would combine the online services of America Online,
which include its 14 million-member AOL service, with Netscape's
leading Internet browser and one of the top gateways to the World
Wide Web, its Netcenter Web site.
Sources familiar with the talks said a deal could be announced
before U.S. stock markets opened on Monday, but added that no
definitive agreement had been reached and the deal could still fall
through.
Any pact was likely to value Mountain View, Calif.-based Netscape
at some premium to its current market capitalization of about $4
billion, sources said.
In a side agreement, Sun Microsystems Inc <SUNW.O>. -- the
developer of the Java programming language, which has had a
long-standing relationship with Netscape -- would partner with the
acquired Netscape to distribute its software that runs and manages
the server computers that power Web sites. The companies declined
to comment on a potential deal.
The acquisition would pit Dulles, Va.-based AOL, the largest online
services, more directly against software giant Microsoft Corp
<MSFT.O>., which has been aggressively adding to its MSN
online service and Internet portal, or gateway to the Web.
While not as popular as Yahoo! Inc.'s site, Netcenter is highly
trafficked and would help AOL as it strives to better compete against
Yahoo on its own turf and move beyond its proprietary online
service.
"This ups the competition between AOL and Microsoft," said Jim
Balderston, an analyst with Zona Research in Redwood City, Calif.
"What AOL feared most about Microsoft was MSN."
The deal also presages a flurry of consolidation among the so-called
portals, which now serve as gateways to the World Wide Web,
analysts said.
With AOL buying Netscape, it puts the pressure on smaller portals
to compete. With its deep pockets, AOL can afford to more
aggressively market the Netcenter site than Netscape.
"This (Netscape) is a company that has been struggling financially
for at least the past three quarters," Balderston said. "AOL is riding
in as the cavalry to rescue them."
Netscape will report its fiscal fourth-quarter earnings on Monday
after the close of U.S. trading. The company is expected to earn 3
cents a share, according to research firm First Call Corp. In its fiscal
third quarter ended July 31, Netscape earned $88,000, breaking
even on a per-share basis, on revenues of $150 million.
The Wall Street Journal and Newsweek magazine both reported that
a deal was in the works. The three companies have been in talks all
week and over the weekend, the Journal reported in its interactive
edition on Sunday.
For America Online, an acquisition of Netscape would fill out its
already wide reach among Internet users and potentially boost
revenues from advertising with the addition of the Netcenter Web
site.
America Online also operates CompuServe, Digital Cities, a local
Internet service in 58 North American cities, ICQ, its recently
acquired Internet chat system used by roughly 10 million active
users and AOL International in Europe, Japan, Canada and
Australia.
Palo Alto, Calif.-based Sun Microsystems, in turn, would in turn
gain access to Netscape's popular software used to run server
computers to power Web sites as it seeks to extend the reach of its
Java programming language, already a staple on the Internet for
animating Web pages.
"There are two aspects to Netscape's business, a media component
and an enterprise (software business) component. Were something
to happen they would have to find separate homes," said Daniel
Rimer, an analyst with Hambrecht & Quist in San Francisco, who
tracks Netscape.
Netscape stock surged last week on speculation of some kind of
deal with AOL. On Friday, Netscape stock rose $2.625 on Nasdaq
to $39.19, while America Online gained $1.50 to $84.875 in
consolidated New York Stock Exchange trading. <NSCP.O>
<AOL.N> <MSFT.O> <SUNW.O>
REUTERS
Rtr 22:38 11-22-98
o~~~ O |
