Sun Acquires Cobalt Networks

Jim Martin

Expanding its server appliance initiatives, Sun Microsystems, Inc. has announced an agreement to acquire Cobalt Networks, Inc. (Mountain View, Calif.). Under terms of the deal, Sun will receive Cobalt—a supplier of server appliance products that function as engines for the delivery of network based services-- in a stock-for-stock merger.

By acquiring Cobalt, Sun will be able to offer server appliance offerings that complement its current offerings. Cobalt's products will also expand Sun’s offerings for service providers.

As part of the agreement, each share of Cobalt common stock will be converted into 0.5 Sun shares, resulting in an aggregate purchase price of approximately $2.0 billion. The acquisition will be accounted for as a purchase and is expected to be completed during Sun's second quarter of fiscal 2001, which ends December 31, 2000.

"Today 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. This move is similar to our entry into the high-end server arena, which we did through our acquisition of Starfire server technology from Cray. Just as that product line has become one of our most successful product lines to date, 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," says Ed Zander, president and CEO, Sun Microsystems, Inc.

Following completion of the merger, Cobalt will become the server appliance business unit of Sun's Network Service Provider organization, reporting to Sun Executive Vice President John McFarlane.

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