America Online, the largest online service provider, announced plans Tuesday to acquire Internet software company Netscape Communications Corp. for $4.2 billion in AOL stock.
The acquisition, said AOL President Bob Pittman, is part of the company’s aim to claim a greater piece of the roaring electronic business industry, better known as e-commerce. Netscape was a good buy since it has beeen active with e-commerce since Microsoft’s competition rendered the web browser business unprofitable a few years ago.
Virginia-based AOL will not, surprisingly, drop Microsoft’s Internet Explorer from its online service and replace it with Netscape Navigator.
In a related deal, AOL agreed to purchase $500 million of hardware from Sun Microsystems Inc., a producer of high-end network computers and computer workstations. The partnership will last through 2002 requires Sun to pay $350 million to AOL for online marketing and advertising.
On news of the deals, AOL shares rose 2 1/8 and Sun gained 1 5/8. Despite the partnership, Netscape shares lost 4.92 percent or 2 1/16 points on news of lackluster third-quarter earnings, also announced Tuesday.