AOL meeting to address Netscape integration

The morning meeting will address "plans for the integration of the two companies," said a companywide summons emailed from AOL president Bob Pittman to Netscape's 2,500 employees, according to sources close to both companies.

Joining Pittman at the meeting will be Jim Barksdale, until last week Netscape's chief executive officer and now a member of the AOL board of directors; and Barry Schuler, president of AOL interactive services, who has been leading the Netscape transition.

The session is expected to be primarily a morale-booster as Pittman and Schuler try to generate enthusiasm about life under AOL. But Netscape has been buffeted in the past week by numerous reports of impending layoffs, and an announcement about job cuts is expected.

The possible layoffs have been estimated in the hundreds, though all the cuts are not expected at once; some divisions have contracts that must be fulfilled before layoffs can take place, for example. AOL executives will be under considerable pressure to address those reports and let Netscape employees know when they can expect to find out about their jobs.

Since announcing its intended acquisition of Netscape in November, AOL has gone to some lengths to retain employees. AOL's skyward stock price has helped toward that end.

But while certain segments of the Netscape engineering staff are crucial for AOL to retain, others, especially on the administrative end, have become superfluous as AOL takes over. Another potential area of overlap is in the content side; Netscape's Netcenter portal and AOL's AOL.com site offer a great deal of similar content.

Tomorrow's meeting also may shed some light on what happens to the company's e-commerce and enterprise software offerings, which under the acquisition deal will be marketed by Sun Microsystems. Software engineers had once been expected to be immune from layoffs, but recent rumors suggest cuts may come there, too. Sun may offer jobs to Netscape technical people who otherwise would be let go.

Sun is paying America Online $1.25 billion over three years for rights to codevelop and sell that software, while AOL will pay Sun $596 million over three years for hardware, Java software, and technical support.

Netscape and Sun have overlapping products in two areas, application servers and messaging servers. Earlier this month Sun unveiled a new version of its NetDynamics application server at a glitzy San Francisco event, sending a message that Sun definitely intends to sell that product. Sun executives said then that it has created a strategy, which it is expected to outline publicly next week, for fitting Netscape software into Sun's product line.

"We expect to see Sun push the Netscape Application Server as the standard application server running on Sun hardware and expect to see it as an integral part of Sun's effort to supply end-to-end electronic commerce," Zona Research said today in a note to clients.

"There is clearly another entire round of integration, which we expect will take the better part of a year, before Sun is likely to present anything like a united picture," Zona said. NetDynamics has been stronger in software tools, the advisory firm said, but Netscape has the stronger brand.

Sun also disclosed in its February Securities and Exchange Commission filing that it will develop a new browser with AOL, but it offered no details.

When the deal was announced, AOL chairman Steve Case stressed the "AOL Anywhere" initiative, which envisions consumers using devices smaller than PCs to access AOL. That may indicate that a browser for smaller devices is in development.

Netscape in December talked up its Gecko browsing engine, the heart of the upcoming Communicator 5.0 browser, as a potential browser for handhelds and other small devices.

Alan Baratz, president of Sun's Java Software division, has indicated the three companies will integrate their browser technologies into one.