Sun Takes a Shine to Cobalt

Sun Microsystems Tuesday agreed to acquire Cobalt
Networks Inc. in a stock-for-stock deal valued at $2

As part of the agreement, each share of Cobalt common stock will be converted into
0.5 Sun shares. The acquisition, which is subject to government and
shareholder approvals, is expected to be completed by the end of this year.

The move fulfills Sun’s need to network its computer strategy, noted Daryl Plummer, group vice president of GartnerGroup , an independent provider of research and analysis on the computer hardware, software, communications and related information technology industries.

“This gets Sun into a new arena that they have not played in,” he said. “To get into the low-end server market, they either had to manufacture the product themselves or they had to get the product from someone else. By purchasing Cobalt, Sun has parachuted into a new playing field.”

Sun now has gained a running leap into a new, potentially lucrative marketplace, according
to Ed Zander, president and COO, Sun Microsystems.

“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,” he said. “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.”

The deal is also beneficial for Cobalt, noted Stephen DeWitt, president
and chief executive officer.

“Sun’s 10,000 person sales force, strong service organization and
world-class customer base is extraordinarily powerful leverage for our
business, and should enable us to dramatically increase our sales of server
appliances,” he said. “Cobalt’s world-class products are a perfect
complement to Sun’s industry-leading server offerings. Our customers will
benefit through access to the full range of Sun’s engineering, sales,
marketing and service resources.”

Plummer of Gartner Group additionally forecasts that Sun will use the acquisition as a launch pad into the Linux game. “It won’t happen right away,” he said. “But I would expect them to eventually bring Solaris into the mix.”

Sun is a leading provider of industrial-strength hardware, software and
services that power the Internet. The company is also the developer of the
Java technology, which enables developers to write applications once to run
on any computer.

In related news, the New York Times Tuesday reported that Sun
Microsystems and its business partners have created a standard for putting
Sun’s Java software into cell phones.

The standard, called the mobile information device profile (MIDP) will be
used in cell phones from Motorola, Nokia, LG Electronics, Nextel and NTT
DoCoMo. It will also be used in handhelds from Research in Motion

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