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A Year Ago: AOL/Netscape and the rising Sun

First published: Tue, 12 Jan 1999 17:32:58 GMT

Sun Microsystems could end up owning Netscape's enterprise business following the merger

With Internet megadeal players Netscape Communications, America Online and Sun Microsystems huddled in quiet conference, even the occasional e-mails to Netscape resellers promising business-as-usual have become increasingly sporadic.

Perhaps that's because the future for Netscape's channel partners will be anything but status quo, according to the few details that have eluded the thick shroud of silence surrounding AOL's pending $4.2bn (£2.56bn) acquisition of Netscape. Details uncovered by US magazine Sm@rt Reseller indicate that not only are the Sun and Netscape channels going to converge significantly, but Sun-which is slated to license Netscape's enterprise software for three years-also could very well walk away from the deal with the Netscape product line in tow.

Indeed, the pending licensing and co-development deal between Sun and AOL gives Sun access to source code for most, if not all, of Netscape's products. According to an industry analyst briefed by executives from the three companies, nothing will prevent Sun from toting away the recipe to those products when its three-year deal expires. "Three years from now, Sun will end up owning all of Netscape's enterprise software," says Bob Chatham, senior analyst with Forrester Research Inc.

In essence, the pending three-way agreement could boil down to what the deal likely would have been had tax-break considerations not interfered: AOL buying Netscape's portal and Sun buying Netscape's high-end software. "AOL people are painting this as a seamless, end-to-end e-commerce deal... But AOL bought Netscape for its portal. It just happened to come with all of this other stuff," says Chatham.

Chatham is not alone. Other analysts highly doubt AOL ever will touch the enterprise software division, beyond merely internalising some of the technology. "AOL is not going to get into the enterprise server software business. How they resolve the [Netscape] channel issue will be interesting," says Zona Research Inc. industry analyst Jim Balderston.

Officials from AOL, Sun and Netscape all declined to comment on the source-code agreements.

If converging product lines isn't enough, additional signs that the Sun and Netscape channels are poised to intersect continue to crop up. Last week, for instance, as hush-hush channel talks kicked off between the two Silicon Valley vendors, Netscape made clear its intentions to seek out advice from its dual-skilled VARs. "We will be talking with some of our resellers who already sell Sun products, [gathering] information from them to help us move forward," says Debra Kuhns, Netscape's VP of channel marketing.

These comments come just one month after Netscape e-commerce VP Steve Savignano told Sm@rt Reseller that "Netscape's distribution strategy will merge with Sun's distribution strategy." At the time, Savignano didn't say the two channel programs would be fused, just that there could likely be "two separate channels with two like strategies."

Increasingly, resellers are beginning to embrace the obvious: Expertise in both the Sun and Netscape product lines could be pivotal to their future success. For instance, Sage IT Partners Inc., a big reseller of Netscape servers and a former Sun partner, is now strongly considering a renewed foray into Sun-based solutions. "We're definitely thinking about rekindling our relationship with Sun in light of this deal," says Sage IT's director of Internet consulting David Sonnenschein. "The Sun box with a Netscape application server can be a very strong solution." Fortunately for resellers and direct-sales representatives alike, the amount of skill-set overlap between the two vendors is fairly minimal. For example, while Sun's sales force is some 7,000 strong, it boasts only approximately 100 people in the enterprise software space, according to Forrester's Chatham.

Resellers believe the same holds true for the channel. Says Wes Pajunen, VP of business development at Netscape reseller Burnt Sands Solutions: "It's simple. Sun VARs concentrate on hardware first. Netscape VARs focus on enterprise software first."

But the picture isn't quite as rosy when it comes to overlapping products, such as the vendors' application servers and messaging servers. With joint development of these products scheduled to begin once the three-way deal closes early this year, which vendor's product will be emphasised in future releases? And how will this affect resellers' ability to upgrade? Neither Netscape nor Sun are providing any answers to those pressing questions.

So far, several Netscape resellers, like Sage IT, are confident that Netscape's app server is superior and will be the predominant technology in any co-development effort. "Netscape's Kiva technology is a good couple of steps ahead of NetDynamics (Sun's application server). If it fuses at all, it will be in the direction of [Netscape's application server]," asserts Sage IT's Sonnenschein.

But even confident resellers like Sonnenschein are biting their nails until the deal's details emerge. "My channel rep has been extremely quiet lately. Until Sun and Netscape figure everything out, it's all still up in the air," he says.

For resellers waiting to get a clear-cut product game plan from the digested Netscape entity, don't hold your breath. Officials from the three companies say they will keep all details silent until the hefty deal goes through. Just how long might that be? "No comment," says an AOL spokesperson.

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