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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 terms of the agreement, Netscape will be operated by AOL as a separate division, while AOL leverages Netscape’s Web browser software and widely-used NetCenter Web site. With the acquisition, AOL will be in control of two of the Web’s four most trafficked "portal" sites, which has some analysts saying AOL may be able to attract as much as a third of all online advertising revenue. In addition, AOL and Sun Microsystems have agreed to a three year partnership whereby Sun will distribute Netscape’s server software for businesses and enterprises, and pay AOL $350 million dollars in licensing and marketing fees in exchange for AOL’s adoption of Sun’s Java technology and the purchase of $500 million of Sun’s high-end computers. Microsoft is already claiming the AOL-Netscape merger undermines the government’s ongoing antitrust case against Microsoft, although Microsoft opponents argue the merger only serves as further evidence of the difficulty of competing against Microsoft. For the time being, AOL says it plans to continue distributing Microsoft’s Internet Explorer so that AOL’s client software remains bundled with Windows. The merger should be completed by June of 1999.

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