AOL's Netscape to Swerve toward Sun

The acquisition of Netscape Communications Corp. by America Online Inc. (<A HREF="http://www.aol.com">www.aol.com</A>) in November marked the end of an Internet era. But will it also mean an end to the development of Netscape's enterprise software products for Windows NT?

Analysts question what the AOL acquisition of Netscape and the AOL strategic alliance with Sun mean for Netscape's NT-based enterprise software.

The acquisition of Netscape Communications Corp. by America Online Inc. (www.aol.com) in November marked the end of an Internet era. But will it also mean an end to the development of Netscape's enterprise software products for Windows NT?

Netscape says no. "It's business as usual," says spokeswoman Maggie Young, meaning that development plans and support for NT are still in place. A representative from AOL did return calls, but could not comment. Companies involved in acquisitions are prohibited by law from making certain statements.

But while the parties to the deal remain mum, industry analysts' tongues were wagging. They questioned both AOL's and Sun's motivations for the deal. They questioned Sun's ability to market Netscape's software successfully. Above all, they questioned what the new landscape will mean for existing users of Netscape server software.

To recap, after announcing the $4.2 billion acquisition of Netscape, AOL also announced a three-year strategic alliance with Sun to market and develop Netscape's enterprise software product line, which includes e-commerce, Web-application, messaging and directory servers. In exchange for $350 million in licensing fees, AOL is expected to buy $500 million in hardware and services from Sun.

Despite the breadth of the announcement, analysts at Zona Research (www.zonaresearch.com) say Sun is merely "a third party that was brought in to make AOL's $4.2 billion eyeball acquisition seem sane," referring to the value of Netscape's Netcenter web portal, which draws an estimated 17 million visitors a month. Mike West, vice president and research director for Internet and network computing at the GartnerGroup (www.gartner.com), agrees. "I don't think (AOL) was that interested in these (server) products in the first place," he says.

As for Sun's motivation, analysts’ views differ. Many recognize that an alliance with AOL provides a strong outlet for Sun's Java programming language. Zona’s analysts suggested the deal could resurrect plans to create "Javagator," an all Java version of Netscape's Navigator browser that was to be targeted at network computers.

GartnerGroup's West has no question in his mind about Sun's motives. "Sun has its own agenda. What is that agenda? Two words: Nuke Bill," he says. "Their intent is to use Netscape software on Solaris to provide the top to bottom software stack they need to compete against NT and to prevent Microsoft from taking over the enterprise." As a result, Gartner is concerned that Netscape's support for the NT versions of its products is at risk.

All three companies have been short on specifics, but in announcing the deal, Sun and AOL said their e-commerce products would be available on Sun's Solaris operating system "as well as on other operating systems."

Even if Sun does continue to help support NT versions of Netscape software, Sun's previous acquisition of NetDynamics, an application server software company, could provide a source of contention. In a research paper released after the announcement, International Data Corp. (IDC, www.idc.com) analysts pointed out that there is extensive overlap between NetDynamics' and Netscape's product lines. GartnerGroup analysts say they doubt that Sun will invest in both sets of products.

To some analysts, the problem with the deal goes beyond support for NT. The Meta Group (www.metagroup.com) proposed the bleakest view of the future for Netscape's enterprise software product line, saying they expect "a culmination of Netscape's steady erosion as an intranet solution and transformation into an eventual software factory for AOL and Sun."

Also see: Sun Advances Java