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AOL in talks to buy Netscape

November 23, 1998
Web posted at: 2:00 PM EST

by Jana Sanchez-Klein and Scott Magoon

(IDG) -- Netscape Communications confirmed Monday that it is in talks with America Online regarding a proposed merger that would dramatically shift the balance of power in the online world.

The discussions involve a stock-for-stock, pooling-of-interests transaction in which Netscape stockholders would receive 0.45 shares of AOL common stock for each share of Netscape common stock, according to Netscape. A merger could be worth at least $4 billion, based on the market capitalization of Netscape.

According to numerous press reports over the weekend, including online versions of The Wall Street Journal and Newsweek magazine, Sun Microsystems also may be involved in the deal.

Sun, AOL and Netscape reportedly were in talks all week and over the weekend but have not yet reached an agreement. The companies are expected to announce Monday that the negotiations are continuing.

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The leaked details include AOL taking over Netscape's Web portal, or "Netcenter" as well as Netscape's popular Web browser software. Reportedly, Sun would take over the enterprise side of Netscape's business and pay AOL a fee for using Netscape technology. Netscape currently sells a number of business applications, including those used for messaging, groupware, and electronic commerce applications.

The deal would mean that AOL would retain the Netscape brand name and would not involve any staff layoffs, according to the reports. Netscape's president and CEO, James Barksdale, has reportedly been offered a seat on AOL's board of directors as part of the deal.

The deal could have far reaching effects on the Department of Justice case against Microsoft, as well as changing the landscape of the "browser wars." Netscape's exit with a bang would also likely impact the ongoing Department of Justice antitrust suit against Microsoft, which has looked at Microsoft's alleged efforts to drive Netscape out of business.

Sources familiar with the deal reportedly said that AOL would now be in a position to get a huge amount of electronic commerce on the Web. In addition to its own 14 million subscribers, Netscape's Netcenter gets about 20 million visitors per month.

Analysts see AOL, strengthened by Netscape's technology and users, as a potential threat to Microsoft's growing e-commerce ventures.

The deal likely would need approval from government regulators.

Jana Sanchez-Klein is London Bureau Chief for the IDG News Service. Scott Magoon is a correspondent in the IDG News Service's Boston office.

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