On November 24, 1998, America Online (AOL) announced the acquisition of Netscape Communications (Netscape), a leading Internet browser company, for $10 billion in an all-stock transaction. With this acquisition, AOL got control over Netscape's three different businesses – Netcenter portal, Netscape browser software and a B2B e-commerce software development division.
According to the terms of the deal, Netscape's shareholders received a 0.45 share of AOL's common stock for each share they owned. The stock markets reacted positively and AOL's sharevalue rose by 5% just after the announcement. Once shareholders and regulatory authorities approved the deal, Netscape's CEO James Barksdale (Barksdale) was supposed to join AOL's board. Many analysts felt that this acquisition would help AOL get an edge over Microsoft, the software market leader, in the Web browser market. Steve Case, (Case) Chairman and CEO of AOL, remarked, "By acquiring Netscape, we will be able to both broaden and deepen our relationships with business partners who need additional level of infrastructure support, and provide more value and convenience for the Internet consumers."
However, a certain section of analysts doubted whether AOL's management would accept Netscape's casual and independent culture. Moreover, they were worried that this deal may lead to a reduction in Netscape's workforce, the key strength of the company.
