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Filed by Sun Microsystems, Inc. Pursuant to Rule 425
Under the Securities Act of 1933
Subject Company: Cobalt Networks, Inc.
Commission File No.: 0-24360
SUN MICROSYSTEMS CONFERENCE CALL SCRIPT
CONFERENCE CALL September 19, 2000 8 a.m., PST
8:00 AM CON CALL STARTS
JOHN LOIACONO:
Good afternoon and welcome to the Sun press and analyst conference call. I'd
like to thank you all for joining us today.
My name is John Loiacono, and I am a Senior Vice President and Chief Marketing
Officer of Sun.
During this conference call we will make projections or other forward-looking
statements regarding a proposed transaction and the transactional expectations
and effects on earnings resulting from the transaction. Such statements are
predictions only and involve risks and uncertainties such that actual results
may differ materially. Please refer to Sun's periodic reports that are filed
from time to time with the Securities and Exchange Commission (including the
Company's form 10-K for the fiscal year ended June 30, 1999 and Forms 10-Q for
the fiscal quarters ended September 26, 1999, December 26, 1999, and March 26,
2000 ) and to the registration statement and other documents to be filed with
the Securities and Exchange Commission in connection with the transaction to be
discussed. These documents contain or will contain and identify important
factors that could cause the actual results to differ materially from those
contained in our projections or forward-looking statements.
Let me introduce everyone present in the room today:
o Ed Zander, President and Chief Operating Officer of Sun.
o Stephen DeWitt, President and CEO of Cobalt
o Mike Lehman, Executive Vice President of Corporate Resources, and Chief
Financial Officer
o John McFarlane, Executive Vice President of the Network Service Provider
Group
o Jonathan Schwartz, Senior Vice President, Corporate Strategy and Planning
We'll have a few minutes of prepared remarks from Ed, and Steve, followed by a
Q&A session with the team.
So now I'll turn the call over to Ed Zander.
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ED ZANDER:
Thank you and good afternoon. Today we're pleased to announce an agreement in
which Sun will acquire Cobalt, a leading supplier of server appliances.
Under the terms of the agreement, Sun common stock and options with a value of
approximately $2.0 billion will be exchanged for all of the outstanding shares
and options of Cobalt. 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.
Six years ago, Sun started to architect and enable what we refer to as the
Service-Driven Network. The building blocks have included powerful servers,
high-capacity data storage systems, and a growing list of software solutions,
including Solaris, Java, Jini, iPlanet e-commerce applications, and Forte
development tools.
Today is about adding another key component to this architecture. It is about
the expansion of the service provider model. The ability to provide services to
customers that are easy-to-use, reliable and economical through something called
a server appliance.
Server Appliance products are simple and cost-effective devices that function as
engines for the delivery of network-based services. Much like your television or
your telephone, these appliances simply plug-in and perform specific functions
with little technical knowledge needed. With this acquisition, Sun expects to
accelerate its move into the server appliance arena -- projected to grow to
$15.8 billion by 2003, according to Dataquest.
What the Cray deal in 1995 was to our high-end server line, Cobalt is to the low
end -- a golden opportunity to grow the business.
Cobalt's products enable Sun to expand its' service provider product offering to
form the basis for Sun's server appliance strategy.
Sun will be able to offer to its customers a product line from turnkey
appliances to massively scalable data-center solutions with price points from
less than $1,000 to over $1M.
Why Cobalt?
For starters, Cobalt is a leader in the server appliance arena, which will give
Sun instant presence in this fast-growing area.
This deal is synergistic for many reasons. For instance, Cobalt is focused on
service providers, as is Sun, and Cobalt has leading-edge products that
complement Sun's.
Cobalt is also attractive to us because it has a world-class management team and
top-notch employees with the know-how and engineering talent in server
appliances.
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We believe this deal is good for Sun, good for Cobalt, and good for our
customers.
It furthers our ability to help customers establish an online presence --
easily, cost-effectively, and reliably -- as Cobalt's award-winning low-end
server appliance line is coupled with Sun's world-class customer service and
integrated product portfolio.
What's more, Cobalt customers will have the resources of a Fortune 100 company,
along with all its service-provider and channel partners, at their disposal.
After the deal closes, existing products from Cobalt will be sold by Sun's sales
force and future product plans will be developed.
With Sun's R&D resources, mature business infrastructure, global presence and
massive sales force, we expect to accelerate the adoption of Cobalt's products
and place Sun firmly at the front of the appliance server arena.
It is now my pleasure to introduce Stephen DeWitt
COBALT CEO:
Thanks Ed. Very pleased to be here.
First let me talk a little about who Cobalt is and what we do.
Cobalt was founded in 1996 and now has nearly 300 employees and 4,000 customers
worldwide. Our product line is in its fourth generation, and approximately 50%
of our business comes from outside of North America.
Like Sun, Cobalt has been focused on service providers. Also, Cobalt's vision
and products are complementary with Sun's.
Much like Sun's vision of connecting anyone, anywhere, anytime, on any device,
Cobalt started with the goal of bringing the power of the Internet to every
person or organization who needs it -- with ease and at an economical price.
The ubiquity of the Internet has created an unprecedented opportunity for the
democratization of technology. Cobalts goal was to address this opportunity by
creating turnkey, cost-effective products that leverage the power of the
Internet not just for the Fortune 1000, but for the Global Five Million.
Small to mid-size organizations such as businesses, workgroups, branch offices,
educational institutions, web designers, and network application developers want
an easy-to-use, integrated, cost-effective way to establish an online presence
quickly.
They can do this by deploying a Cobalt product on their premises, or by
outsourcing the service from a hosting provider. In either case, their
requirements are straightforward: they need access to a variety of network
services, simply and economically.
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Server appliances are the solution. They are network-based devices optimized to
perform a finite set of related server functions. They are deployed quickly,
require little technical knowledge, and enable the user to create a Web presence
easily and cost-effectively. In minutes, the user has access to a full range of
Internet/intranet services such as e-mail, web hosting, web publishing,
discussion groups, firewall, file sharing, caching, and storage.
The simplicity and economics of Cobalts products have driven rapid adoption
worldwide. All of Cobalt's products require less than 15 minutes to install and
are administered from anywhere through a simple browser-based tool. They are a
fraction of the price of high-powered servers, allow for plug-in applications,
and are highly reliable.
Along with end users, service providers have adopted Cobalt's products at an
impressive pace. In fact, there are some service providers with over 1,000
Cobalt products installed in their data center already. They have found that
Cobalts products enable them to tap new massive markets while producing a return
on investment very quickly.
End users receive the benefits instantaneously. Service providers can generate a
rapid return-on-investment. For these two core reasons, Cobalt has had
tremendous success in this marketplace.
Cobalts products have won a vast number of industry awards worldwide. In a
relatively short period of time Cobalt has shipped tens of thousands of units
around the world. In fact, in an achievement that is testimony to the uniqueness
of the design, the Cobalt Qube has been ensconced in the German Museum of Modern
Art.
Finally, as Ed said we share many of the same Cobalt chip customers. AT&T, Korea
Telecom, NTT DoCoMo, and France Telecom are a few examples. The symbiosis of our
two companies is tremendous.
This is a great day for our companies, our employees and our customers.
With Cobalt's incredible products and Sun's 10,000 person sales force, strong
service organization, and world-class customer base, we should be able to blow
the doors off this incredible market opportunity.
Let me now turn it back over to Ed.
ED ZANDER:
So there it is. Let me sum this all up by giving you the main benefits of this
deal for Sun and our customers.
First, this is a natural fit for Sun and will combine the strengths of two great
companies with common vision, extend our product line and accelerate our lead in
the server appliance marketplace.
Second, Cobalt's products will benefit from the R&D resources of Sun, a $16B
technology provider of infrastructure for network computing.
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Third, we're excited about how this deal will enhance our ability to meet the
needs of our customers.
JOHN LOIACONO:
Thank you, Ed. That completes the formal section of this call. We can now take
questions for the remainder of the time available. Operator.
OPERATOR:
Operator handles calls announcing people by name.
--- END CONFERENCE CALL ---
Additional Information: Sun plans to file a Registration Statement on SEC Form
S-4 in connection with the merger and Cobalt expects to mail a Proxy
Statement/Prospectus to its stockholders containing information about the
merger. Investors and security holders are urged to read the Registration
Statement and the Proxy Statement/Prospectus carefully when they are available.
The Registration Statement and the Proxy Statement/Prospectus will contain
important information about Sun , Cobalt, the merger and related matters.
Investors and security holders will be able to obtain free copies of these
documents through the web site maintained by the U.S. Securities and Exchange
Commission at http//www.sec.gov. In addition to the Registration Statement and
the Proxy Statement/Prospectus, Sun and Cobalt file annual, quarterly and
special reports, proxy statements and other information with the Securities and
Exchange Commission. You may read and copy any reports, statements and other
information filed by Sun and Cobalt at the SEC public reference rooms at 450
Fifth Street, N.W., Washington, D.C. 20549 or at the Commission's other public
reference rooms in New York, New York and Chicago, Illinois. Please call the
Commission at 1-800-SEC-0330 for further information on public reference rooms.
Sun's and Cobalt' filings with the Commission also are available to the public
from commercial document-retrieval services and at the web site maintained by
the Commission at http//www.sec.gov. Cobalt, its directors, executive officers
and certain members of management and employees may be soliciting proxies from
Cobalt stockholders in favor of the adoption of the merger agreement. A
description of any interests that Cobalt's directors and executive officers have
in the merger will be available in the Proxy Statement/Prospectus.
