Cobalt makes Linux-based "server appliances," servers designed to do a limited number of tasks with a minimum amount of fuss. The company filed to go public in September.
Through the agreement, Gateway adds server appliances to a server line that thus far has included only general-purpose machines that stemmed from its 1997 acquisition of Advanced Logic Research.
Some of Gateway's biggest competitors, including Dell, Compaq, and Hewlett-Packard, have embraced the server appliance strategy. Though analysts project a big market for the relatively simple machines, they also predict sales of server appliances will steal revenue away from general-purpose server sales.
The Cobalt machines, such as the Qube and RaQ, use the Linux operating system, a clone of Unix that's developed through the open-source method of sharing programs freely. It's not Gateway's first contact with Linux, though. The company announced it will custom install Red Hat Linux in September.
Gateway said in a statement that the deal with Cobalt will help Gateway in its effort to sell Internet infrastructure to small and medium businesses.
Verio, a Web site hosting company, will use Cobalt RaQ servers to power a new service it is offering. The company has about 1,650 servers, of which 130 are from Cobalt, the company said.
The Verio service offers customers email accounts, Web page storage space for high-traffic sites, search engine tools, and round-the-clock server monitoring. The service, which costs between $230 and $475 a month, was designed by DigitalNation, a company Verio acquired.
Cobalt Networks isn't the only company to see green in the server appliance market. CacheFlow, which sells special-purpose high-speed servers to speed Internet access, filed to raise as much as $50 million in an initial public offering.
In the three months ended July 31, CacheFlow had revenues of $3.6 million but a net loss of $6 million.
CacheFlow's IPO is being underwritten by Morgan Stanley, Credit Suisse First Boston, and Dain Rauscher Wessels, the company said in a September 28 filing with the Securities and Exchange Commission.