Sun Microsystems and Cobalt Networks have announced an agreement whereby Sun Microsystems will acquire Cobalt Networks in a stock-for-stock merger worth $2 billion.
The acquisition is anticipated to accelerate Sun’s entry into the growing server appliance marketplace and bolster its focus on network computing.
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 $2 billion.
This acquisition will be accounted for as a purchase and is expected to be completed during Sun’s second fiscal quarter of 2001.
Sun estimate that the transaction will accrete to earnings before interest, taxes, depreciation and amortisation, gains on the sale of equity investments and in-process research and development charges for the second half of this fiscal year.
Following completion of the merger, Cobalt will become the server appliance business unit of Sun’s Network Service Provider organisation, reporting to John McFarlane, Sun Executive Vice President.
‘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,’ said Ed Zander, Sun Microsystems’ President and Chief Operating Officer.