The Deal is Done: AOL buys Netscape Communications

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

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

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

The purpose of the deal becomes even more clear when you consider that SunMicrosystems, 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-PCdevices.

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