Sun Takes a Shine to Cobalt

By Carol King,

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

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.