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Sun buys Cobalt for $2 billion

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Sun Microsystems, in order to add a server appliance offering to its server portfolio, announced Tuesday that it will acquire Cobalt Networks in a stock-for-stock merger valued at $2 billion.

Mountain View, California-based Cobalt supplies server appliances, such as its Cobalt Qube, Cobalt Cache, Cobalt RaQ and Cobalt NASRaQ, to businesses, ISPs and educational institutions for Web hosting. These appliances deliver network-based services.

Under the terms of the merger agreement, each share of Cobalt common stock will be converted into 0.5 Sun shares, resulting in a purchase price of $2 billion. According to the statement, Sun expects to complete the purchase of Cobalt during the second quarter of its 2001 financial year, which ends Dec. 31, 2000. The closing of the acquisition is subject to standard governmental approvals, Cobalt shareholder approval and customary closing conditions.

After the merger is completed, Cobalt will become the server appliance business unit of Sun's Network Service Provider organization, the companies said.

Through the merger, Cobalt expects to increase sales of server appliances, while Sun expects to establish their company in the low-end server appliance market, according to the statement.

In midday trading on Tuesday, Sun shares were trading at $113.56, down from Monday's closing price of $115.25 but up from the day's low of $112.56.

This year, Sun has also purchased Innosoft International to strengthen its iPlanet E-Commerce solutions, operated with America Online's Netscape Communications Corp.

Sun, in Palo Alto, Calif., is at www.sun.com. Cobalt, based in Mountain View, Calif., is at www.cobalt.com.

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