The Deal is Done: AOL buys Netscape Communications

The mercurial rise and fall of Netscape Communications completed Tuesday when online giant America Online announced that it was buying the browser company for $4.21 billion. The differences between the two companies are almost astounding, despite the fact that both are involved with the Internet online experience: AOL, with 14 million users, is seen as the home for "newbies" on the Net, while people who like to think of themselves as more Web-savvy tend to download Netscape Navigator. Most unclear is what AOL hopes to gain from the deal, other than a chance to stick it to rival Microsoft.

"The acquisition of Netscape is a big step forward for America Online that will greatly accelerate our business momentum,” said AOL chairman Steve Case. "Netscape has played a key role in helping consumers benefit from the enormous power of the Internet, and we share the same mission."

Netscape stockholders will receive 0.45 shares of AOL stock for each share of Netscape stock. The transaction is expected to be completed sometime in early 1999, pending regulatory approval. Netscape will be run as a separate division of AOL and won't move from Mountain View, California to AOL's home in Virginia. Netscape CEO Jim Barksdale will join AOL's board.

The purpose of the deal becomes even more clear when you consider that Sun Microsystems, now in court with Microsoft over the Java programming language, is also involved: Sun will distribute Netscape's server software, while AOL promises to use Sun's Java to offer online services to non-PC devices.

The fact that AOL, Netscape and Sun are three of the most vocal Microsoft bashers hasn't been lost on Microsoft. Possible impacts of the deal were discussed Monday during Microsoft's antitrust trial. Microsoft says the buyout proves that competition is still alive and well in the digital age, but this morning's announcement included a small bit of news that disproves that: AOL will continue to use Internet Explorer in its client software so that it will retain its valuable spot on the Windows desktop. In other words, despite the fact that it finally owns a decent browser, it will continue to use a rival's browser to ensure that it doesn't get locked out of Windows on new machines

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