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To: Tony Viola who wrote (110291)	9/19/2000 2:21:09 PM
From: Road Walker	Respond to of 186894

Tony, Following is interesting on Sun buying COBT. Should be a good fit, MHO. I wonder what kind of share Intel's NetStructure line has in network appliances? Sun buys Cobalt in $2 billion deal By Cecily Barnes and Stephen Shankland Staff Writers, CNET News.com September 19, 2000, 10:20 a.m. PT update Sun Microsystems today said it will purchase Cobalt Networks in a $2 billion stock transaction, a move the company says will accelerate its entry into the server appliance market. The deal marks a major strategic shift for Sun, whose bread and butter has been selling general-purpose servers. While general-purpose servers still are very important for high-end corporate computer networks, special-purpose "server appliances" such as those Cobalt sells typically are less expensive, easier to use, and geared to a specific task. The deal also means that Sun, at least for the time being, will be adopting two foreign technologies into its product line: Intel-compatible Advanced Micro Devices CPUs and the Linux operating system. Cobalt's shares shot up on the news. In afternoon trading, the stock was up $14.06, or 34 percent, to $55.19 on a volume of 7.6 million shares--more than 11 times the average daily volume. Under the terms of the agreement, each share of Cobalt common stock will be converted into half a share of Sun stock, resulting in an aggregate purchase price of approximately $2 billion. The acquisition should be completed by Dec. 31. Sun has avoided the server appliance area, but its Intel-based competitors such as Dell Computer, Compaq Computer, IBM and Hewlett-Packard have been moving to embrace the special-purpose servers. Even though server appliance sales cut into revenues from more expensive general-purpose models, analysts say these large companies must adopt server appliances or face losing the business altogether to start-ups. Sun has been lukewarm on the rise of Linux, which is similar to but less mature than its own Solaris version of Unix. While sales of Linux computers, usually based on Intel chips, have cut into low-end Sun server sales, Linux's cultural and technological similarity to Solaris means it's an easy upgrade and that Linux probably undermines Microsoft more than it does Sun. International Data Corp. has estimated the server appliance market will hit $12 billion by 2004. Cobalt makes a server appliance called the Qube that offers small businesses an easy way to connect to the Internet, but the company has been focusing more attention on its rack-mounted Raq products, which handle tasks such as housing Web pages or storing Web site information in "caches" closer to the person who needs it. Cobalt unveiled its newest product, the AMD K6-2-based Raq4, in July. The company also sells a product for adding storage capacity to local networks. "We're acquiring Cobalt to establish ourselves in low-end server appliances and immediately jump into the marketplace with a proven, world-class product offering," Sun president Ed Zander said in a statement. Palo Alto, Calif.-based Sun makes computer servers but has relied on resellers and software companies to specialize its products. "Now with this deal it will offer a more complete product on its own," said Shebly Seyrafi, an enterprise hardware analyst at A.G. Edwards. Analysts say the move symbolizes Sun's seriousness about moving into the server appliance market and taking on its competitors. "It's not simply willing to sit by and let other companies take over that market," Seyrafi said. "In terms of jump-starting its already good presence in the appliance area, this is a solid acquisition."