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America Online Acquires Netscape for $4.2 Billion in a Bid to Dominate the Internet

Strategic Insights

— 2 min read

America Online Inc. has completed its $4.2 billion purchase of Netscape Communications Corporation, marking a significant development in the rapidly evolving world of Internet commerce. The acquisition is part of America Online's strategy to transform the Internet into a vast virtual mall, providing users with a seamless and integrated experience.

Key Takeaways:

  • The acquisition is part of America Online's ambitious plan to create a networked world where the Internet serves as a limitless marketplace for information, entertainment, products, and services.
  • Netscape's industrial-strength software for running Internet sites will be a crucial component in America Online's bid to establish itself as the leading Internet portal.
  • The deal is expected to revolutionize the way people access the Internet, with inexpensive Internet appliances, pagers, cell phones, and television set-top boxes potentially becoming common devices in the next five years.
  • America Online and Netscape have been evolving toward each other for over a year, with both companies having undergone significant transformations to adapt to changing market conditions.
  • The acquisition has raised concerns among analysts that America Online may not be equipped to handle Netscape's talented programmers, who may be reluctant to work for a company considered "middle-brow."
  • The alliance with Sun Microsystems, which brings a strong technology partner and a cyber-savvy sales force, is critical to the success of the deal.
  • The companies' vision involves accelerating the timetable for the day when the Net is ubiquitous, with 25% of American households currently having access to the Internet.

Statistics:

  • The acquisition price is $4.2 billion, to be paid in America Online stock.
  • Netscape shareholders will receive 0.45 share of America Online for each Netscape share.
  • America Online shares rose $2.125 to $91.375 yesterday, making each Netscape share worth about $41.12.
  • Netscape shares closed yesterday at $39.875, down $2.0625.
  • America Online has 13 million monthly subscribers to its Internet service.
  • Netscape has 9 million registered users of its portal to the World Wide Web.
  • The alliance with Sun includes a $500 million purchase of computer systems and services over the next three years.
  • The deal is expected to generate over $350 million in licensing, marketing, and advertising fees for America Online from Sun over the next three years.

Sources:

  • "America Online Agrees to Buy Netscape for $4.2 Billion" by The New York Times, Page C1.
  • "Elements of the Deal" illustration by The New York Times, Page C5.
  • "Netcenter, the portal to the World Wide Web" by Netscape Communications Corporation.
  • "The $4.2 billion purchase is being made with America Online stock" by The New York Times, Page C5.
  • "The alliance with Sun is a related but separate marketing and technology development agreement" by The New York Times, Page C5.
  • "The deal is expected to revolutionize the way people access the Internet" by The New York Times, Page C1.

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