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Sun Takes a Shine to Cobalt

Sep 19, 2000, 18:51 (0 Talkback[s])
(Other stories by Carol King)

By Carol King, internetnews.com

Sun Microsystems Tuesday agreed to acquire Cobalt Networks in a stock-for-stock deal valued at $2 billion.

As part of the agreement, each share of Cobalt common stock will be converted into 0.5 Sun shares. The acquisition, which is subject to government and shareholder approvals, is expected to be completed by the end of this year.

The move fulfills Sun's need to network its computer strategy, noted Daryl Plummer, group vice president of GartnerGroup, an independent provider of research and analysis on the computer hardware, software, communications and related information technology industries.

"This gets Sun into a new arena that they have not played in," he said. "To get into the low-end server market, they either had to manufacture the product themselves or they had to get the product from someone else. By purchasing Cobalt, Sun has parachuted into a new playing field."

Sun now has gained a running leap into a new, potentially lucrative marketplace, according to Ed Zander, president and COO, Sun Microsystems.

"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," he said. "We think the demand for these high-volume, turnkey devices will explode in the next couple of years. Cobalt is our bet for the future."

The deal is also beneficial for Cobalt, noted Stephen DeWitt, president and chief executive officer.

"Sun's 10,000 person sales force, strong service organization and world-class customer base is extraordinarily powerful leverage for our business, and should enable us to dramatically increase our sales of server appliances," he said. "Cobalt's world-class products are a perfect complement to Sun's industry-leading server offerings. Our customers will benefit through access to the full range of Sun's engineering, sales, marketing and service resources."

Plummer of Gartner Group additionally forecasts that Sun will use the acquisition as a launch pad into the Linux game. "It won't happen right away," he said. "But I would expect them to eventually bring Solaris into the mix."

Sun is a leading provider of industrial-strength hardware, software and services that power the Internet. The company is also the developer of the Java technology, which enables developers to write applications once to run on any computer.

In related news, the New York Times Tuesday reported that Sun Microsystems and its business partners have created a standard for putting Sun's Java software into cell phones.

The standard, called the mobile information device profile (MIDP) will be used in cell phones from Motorola, Nokia, LG Electronics, Nextel and NTT DoCoMo. It will also be used in handhelds from Research in Motion.

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