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AOL Buys Netscape for $4.2 Billion

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AOL Buys Netscape for $4.2 Billion -- America Online has announced it will buy Netscape Communications in a $4.21 billion stock deal. Under the agreement, AOL will operate Netscape as a separate division, while leveraging Netscape's Web browser software and widely used NetCenter Web site. With the acquisition, AOL will control two of the Web's four most trafficked "portal" sites, which has some analysts saying AOL may attract as much as a third of online advertising revenue. In addition, AOL and Sun Microsystems have agreed to a three year partnership whereby Sun will distribute Netscape's server software and pay AOL $350 million dollars in licensing and marketing fees. In exchange, AOL will adopt Sun's Java technology for use in "AOL devices" and purchase $500 million of Sun's high-end computers. Microsoft is already claiming the AOL-Netscape merger undermines the ongoing antitrust case against Microsoft, although others argue the merger serves as evidence of the difficulty of competing against Microsoft. For the time being, AOL says it plans to continue distributing Microsoft's Internet Explorer so AOL's client software remains bundled with Windows. [GD]

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