Netscape buys server start-up

In a move to bolster its presence in the extranet market, Netscape Communications (NSCP) said today that it will buy Silicon Valley start-up Kiva Software in a stock deal worth $179.5 million.

The deal gives Netscape a high-end application server to add to its line of enterprise server products. One industry analyst says the move is consistent with Netscape's development strategy of late.

"It's something they've done to kick-start all their development efforts," said Ira Machevsky of the Giga Information Group. "They probably could have developed it themselves, but they would have had to start from scratch."

Faced with Microsoft's assault on the Web browser market, Netscape has for the past year moved to expand its business model as an enterprise software solutions provider, which means that the company would not only sell finished software products, but also work with their large corporate clients to integrate and customize those products for the clients' networks. Just last week, Netscape chief executive Jim Barksdale said sales of browser software accounted for just 18 percent of revenues last quarter.

Under the terms of the deal, Netscape will exchange 6.3 million shares for every share of Kiva. Based on Netscape's closing price of 28-1/2 today, the deal is valued at $179.5 million. The announcement was made after the market's close, and Netscape's shares today finished down 1-1/4 points.

The acquisition, which the companies expect to close this quarter, brings about 100 employees into the Netscape fold. Keng Lim, president and chief executive officer of Kiva, will head up the application server team at Netscape.

With Kiva's Enterprise Server 2.0 due to ship in December, Netscape will have a highly scalable application server offering that will form the basis for other application systems that Netscape offers, such as email, e-commerce, and transaction processing, said John Paul, vice president and general manager of the company's server products division.

For the time being, Netscape will rename and sell the Kiva server as a standalone product. Paul did not disclose any further details about Kiva's integration into Netscape servers, except to say that it was "synergistic" with Netscape's next-generation server plan, code-named Apollo.

Netscape's Paul said that the Kiva server will carry forward with its pricing, which was set to start at $25,000, along with a developer toolkit that costs $1,295 per developer.

Two weeks ago, Netscape announced that it was buying back Actra, its e-commerce software joint venture with GE Information Systems, but chief financial officer Peter Currie said the two acquisitions aren't part of a trend.

"There's nothing on the plate right now," Currie said today. "If I had my druthers, we would take the time we need to integrate the new teams and the new products."