Employees at Netscape have told one San Francisco-based analyst that the company is in acquisition talks with several suitors. Rumors of a takeover caused the company's stock price to shoot up more than 30% this week.
C.B. Lee, an analyst at Sutro & Co. in San Francisco, said he had heard from people inside Netscape that Sun Microsystems, IBM and Oracle are interested in buying Netscape. Reports have also indicated that America Online is interested acquiring a portion of Netscape.
Representatives from Netscape, Sun, IBM, Oracle and America Online said their companies don't comment on market rumors.
"I don't see where IBM would have any particular interest in [Netscape] at all," said Stephen Dube, an analyst at Wasserstein Perella Securities Inc. in New York. "IBM has no interest... in the browser business" and Netscape's software applications overlap IBM's Lotus applications, Dube said, making a deal between the two seem like a long shot.
Although this isn't the first time rumors of a Netscape purchase have surfaced, the company's stock price may finally be in a range that would be attractive to suitors, especially after its stock price plummeted following a poor December earnings report.
"Clearly, this could be very important for Sun," Lee said, "because they [need] to have a browser that is 100% Java-compatible. More importantly, Netscape offers several enterprise-level products, and Sun today is focused and selling mostly to the enterprise."
John Oltsik, an analyst at Forrester Research, said that buying Netscape would help Sun become a legitimate business applications player. If the pair did come to an agreement, Oltsik speculated, Sun would merge Netscape with its JavaSoft division.
However, Oltsik added, "If Sun did it, it would be the biggest risk they've ever taken. It would be a clear strategic move, betting their future on Java and software."
And he questioned whether its executives would take such a risk. "Judging by what Sun said two weeks ago, they aren't willing to take that risk," Oltsik said. At an analyst meeting two weeks ago, Sun had said it intended to develop products internally rather than gaining new technology through large acquisitions.
For IBM, a 100% Java-compatible browser could be one of the pieces that helps bind together many of its various operating systems and hardware platforms. "IBM has probably got more Java programmers than Sun itself," Lee said.
Oracle might have some interest in Netscape because it would give Larry Ellison's company an entry into the office applications space. That could complement Oracle's database and applications business. Netscape's enterprise products could also be a good fit with Oracle's enterprise strategies.
But Oltsik said suitors have good reason to be wary about Netscape. "At this point, if you buy Netscape, 90% of what you're buying is image. Their products haven't been real successful and have had some technical problems," Oltsik said. "This is a boat with a lot of holes in it -- and you'd be buying it because the boat's so pretty."