Netscape Communications Corp - Acquisition By Aol And Sun

Although Netcape's annual revenue reached $534 million in 1997, the company reported a surprising $88 million loss. It laid off 300 workers. Reports soon began to appear that the company was for sale, and Netscape did nothing to dispel the rumors. Netscape's stock had fallen dramatically, but the company had $261 million in the bank. With no debt, it appeared to be a desirable takeover target, and IBM, Oracle, Sun Microsystems, and AOL were all reported to be potential suitors.

In April 1998 Netscape acquired Kiva Software, strengthening its position in the Web server market. Later in the year it acquired AtWeb, which provided automated Web site management and marketing services, and NewHoo, a directory-based search service. These acquisitions would enhance Netcenter, Netscape's portal to the Internet.

After nine months of takeover rumors, AOL announced in November 1998 that it would acquire Netscape for $4.2 billion in a stock-for-stock transaction. By this time Netscape's share of the browser market had fallen to 41 percent, compared to Microsoft's 44 percent market share. After passing regulatory approval in March 1999, the transaction was completed, creating what The Economist called the "world's most powerful Internet company." As part of the deal, Sun Microsystems would pay $350 million over three years to license Netscape's software, and AOL agreed to purchase $500 million worth of servers from Sun. The terms of the three-way deal made it clear that AOL was primarily interested in the consumer side of Netscape's business, which included Netcenter and the company's Web browser, while Sun Microsystems would benefit from Netscape's server business for corporate intranets and e-commerce.

Following the sale of Netscape, Marc Andreessen was named AOL's chief technology officer, but he left after six months to form a new Internet services company, Loudcloud Inc. Jim Barksdale, who realized $700 million from the sale of Netscape, departed to focus on Internet-related investments and philanthropy. Netscape co-founder Jim Clark was involved with other Internet start-ups, including the vertical portals Healtheon and myCFO.