March 30, 1999 10:55 AM PST

AOL, Sun detail software tie-up

NEW YORK--America Online and Sun Microsystems today unveiled the product strategy for their joint alliance to market business software, opting to keep selling enterprise software from both Sun and Netscape Communications, which AOL bought this month for $10.2 billion.

The venture, called the Sun-Netscape Alliance, will field 500 sales people to market offerings from both companies on Sun's Solaris operating system, Linux, Windows NT, and on servers running IBM's and Hewlett-Packard's flavors of Unix.

The new venture will continue to market overlapping products from Sun and Netscape for the rest of this year, then combine the products in early 2000. The first joint products are due by March 2000.

At a press conference held in New York this morning, the companies said their joint product roadmap will include messaging, directory, security, and application servers.

"We want to be the dot com software company," said Mark Tolliver, president and general manager of the alliance, a message repeated throughout the conference. Through the deal, the companies are also establishing themselves to compete in the ebusiness market against both IBM and Microsoft, said Ed Zander, Sun's chief operating officer.

But analysts questioned the scope and ambition of the alliance, which is not a legal joint venture, but rather a commitment from each of the companies to bring 1,000 employees from each firm to the project. The employees will remain with their respective firms.

An AOL spokesman said the companies were not ready to enter a joint venture, but rather wanted to test the waters with an alliance. Executives from both companies would not comment whether a spin-off as a separate company is planned.

"The needle is more on the risk side than the reward side," with the deal, said Scott Smith, a director at Sterling, Virginia-based Current Analysis, who noted the next six months will be crucial for the companies. "You'd like a joint product out more quickly than [in] 2000. There's a lot riding on this. This is the future of Netscape and Sun."

Smith also questioned whether the companies' customers are ready to buy into the online business model the companies are selling.

"It's a question of convincing people of this holistic version of the marketplace and selling them everything from soup to nuts," he said. "It's a new world we're in and they're farther ahead of where the rest of the market is at. That's how Netscape has been all along."

Goldman Sachs analyst Laura Conigliaro noted that AOL and Sun executives offered scant details on the financial end of the deal, including how the alliance's operating budget will work, and how the employees will be compensated. Nonetheless, she said, both companies bring each other skills sets that they lacked alone.

"They have as good a chance as IBM or Microsoft to deliver a product line," she said.

For corporate email and collaboration software, the alliance will release new versions of both Netscape and Sun offerings later this year, then merge the products for a new release in the first quarter of 2000.

A similar path is planned for application servers. The joint effort will sell Sun's recently updated NetDynamics product through this year alongside a new version of Netscape's Kiva application server. Those products will be merged in a release in early 2000.

But the partnership will keep Netscape's directory server, augmenting it with technology from Sun's similar offering. The two companies also will market e-commerce software from Netscape.

The alliance, with about 2,000 employees drawn equally from Sun and AOL's Netscape unit, will put Sun's marketing muscle in big corporations behind Netscape's software, something Netscape never had the resources to do as a standalone company.

As indicated earlier, AOL will develop new versions of the Netscape Navigator and Communicator Web browsers. However, AOL has said that Microsoft's Internet Explorer will remain its preferred browser, largely to give AOL key placement on Windows 98's desktop.

Kim Girard reported from New York. Tim Clark reported from San Francisco.

 

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