Sun moves to acquire server appliance vendor

Sun acquires Cobalt in a move to accelerate its entry into the appliance server arena.
Written by ZDNet Staff, Contributor

Sun Microsystems, Inc. and Cobalt Networks, Inc. today announced that they have entered into an agreement to which Sun will acquire Cobalt in a stock-for-stock merger.

Cobalt is a leading supplier of server appliance products - easy to use and cost effective devices that function as engines for the delivery of network based services.

This acquisition accelerates Sun's entry into the growing server appliance marketplace.

Sun is already a leading provider of low-end, mid-range and large-scale servers to the enterprise and service provider marketplaces; Cobalt's products will add a server appliance offering to that portfolio and expand Sun's offerings for service providers.

Under the terms of the merger agreement, each share of Cobalt common stock will be converted into 0.5 Sun shares resulting in an aggregate purchase price of approximately US$2.0 billion. This acquisition will be accounted for as a purchase and is expected to be completed during Sun's second quarter of fiscal 2001, which ends December 31, 2000. Following completion of the merger, Cobalt will become the server appliance business unit of Sun's Network Service Provider organization.

"Today 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. This move is similar to our entry into the high-end server arena, which we did through our acquisition of Starfire server technology from Cray. Just as that product line has become one of our most successful product lines to date, 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," said Ed Zander, president and chief operating officer, Sun Microsystems, Inc.

"Joining with Sun is a bold strategic move for Cobalt. Sun's 10,000 person salesforce, 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," said Stephen DeWitt, president and chief executive officer, Cobalt Networks, Inc.

Cobalt Networks, Inc. is a developer of server appliances that enable organizations to establish an online presence. Cobalt's product lines - Cobalt Qube, Cobalt Cache, Cobalt RaQ and Cobalt NASRaQ - are used as Internet and Web hosting server appliances at businesses, service providers and educational institutions. Founded in 1996, Cobalt is headquartered in Mountain View, California.

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