Sun Microsystems Acquires Cobalt Networks
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Sun Microsystems Acquires Cobalt Networks

Sun Microsystems Acquires Cobalt Networks

Extends Sun's Network Computing Leadership to Server Appliances

PALO ALTO, Calif., Sept. 19 /PRNewswire/ -- Sun Microsystems, Inc. (Nasdaq:
SUNW - news) and Cobalt Networks, Inc. (Nasdaq: COBT - news) today
announced that they have entered into an agreement pursuant to which Sun
will acquire Cobalt in a stock-for-stock merger. Cobalt is a leading
supplier of server appliance products -- easy to use and cost effective
devices that function as engines for the delivery of network based
services. This acquisition accelerates Sun's entry into the growing server
appliance marketplace and bolsters its long-standing focus on network
computing. Sun is already a leading provider of low-end, mid-range and
large-scale servers to the enterprise and service provider marketplaces;
Cobalt's products will add a server appliance offering to that portfolio
and expand Sun's offerings for service providers.

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 $2.0 billion. This acquisition will be accounted for
as a purchase and is expected to be completed during Sun's second quarter
of fiscal 2001, which ends December 31, 2000. The closing of the
acquisition is subject to governmental approvals, Cobalt shareholder
approval and customary closing conditions. Sun estimates that the
transaction will be accretive to earnings before interest, taxes,
depreciation and amortization, gains on the sale of equity investments and
in-process research and development charges (operating EBITDA) 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 organization, reporting to Sun Executive Vice President John
McFarlane.

``Today we're acquiring Cobalt to establish ourselves in low-end server
appliances and immediately jump into the marketplace with a proven, world
class product offering. 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.
Cobalt is our bet for the future,'' said Ed Zander, President and Chief
Operating Officer, Sun Microsystems, Inc.

``Joining with Sun is a bold strategic move for Cobalt. Sun's 10,000 person
salesforce, strong service organization, and world-class customer base is
extraordinarily powerful leverage for our business, and should enable us to
dramatically increase our sales of server appliances,'' said Stephen
DeWitt, President and Chief Executive Officer, Cobalt Networks, Inc.
``Cobalt's world-class products are a perfect complement to Sun's
industry-leading server offerings. Our customers will benefit through
access to the full range of Sun's engineering, sales, marketing and service
resources.'' The above news release contains forward looking statements
that involve risks and uncertainties. These forward looking statements
include statements regarding the proposed effect of the acquisition on
Sun's earnings, Sun's ability to accelerate expansion into the server
appliance arena, Sun's expectation regarding the success of Cobalt's
products in Sun's product lines, expectations regarding the growth of the
server appliance arena and expectations regarding demand for server
appliances. Actual results may vary materially from the results discussed
in the forward-looking statements. Factors that may cause such a difference
include those risks surrounding the closing of the acquisition, the
successful integration of Cobalt into Sun's business subsequent to the
closing of the acquisition, timely development, production and acceptance
of the products and services contemplated by the proposed acquisition, each
company's ability to compete in the highly competitive and rapidly changing
marketplace and the other risks detailed from time to time in each
company's periodic reports filed with the Securities and Exchange
Commission, including, but not limited to, Sun's report on Form 10-K for
the fiscal year ended June 30, 1999, Sun's reports on Form 10-Q for its
fiscal quarters ending September 26, 1999, December 26, 1999, and March 26,
2000.

About Cobalt Networks, Inc.

Cobalt Networks, Inc. is a developer of server appliances that enable
organizations to establish an online presence easily, cost effectively and
reliably. Cobalt's product lines -- Cobalt Qube, Cobalt Cache, Cobalt RaQ
and Cobalt NASRaQ -- are used as Internet and Web hosting server appliances
at businesses, Service Providers and educational institutions. Cobalt's
solutions are delivered through a global network of distributors,
value-added resellers and ISPs. Founded in 1996, Cobalt is headquartered in
Mountain View, California.

About Sun Microsystems, Inc.

Since its inception in 1982, a singular vision -- The Network Is The
Computer -- has propelled Sun Microsystems, Inc., to its position as a
leading provider of industrial-strength hardware, software and services
that power the Internet and allow companies worldwide to dot-com their
businesses. With $15.7 billion in annual revenues, Sun can be found in more
than 170 countries and on the World Wide Web at http://sun.com.

 
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