Phone.com to Buy Software.com

Phone.com Inc. said Wednesday that it will buy Software.com Inc. for an estimated $6.9 billion in stock, bringing together two young companies vying to be big players in the future of wireless Internet access.

News of the pending deal--along with the addition of a high-ranking executive from Wall Street darling Cisco Systems Inc. to lead the combined companies--sent shares of both merger partners soaring on Nasdaq following the announcement.

Phone.com shares rose $13.06, or nearly 17%, to close at $91.13, while Software.com’s stock price jumped $34.69, or more than 32%, to close at $142.44.

Redwood City-based Phone.com already ranks as a leading provider of specialized “minibrowser” software that allows digital mobile phones to read and display stripped-down Web sites.

Software.com, based in Santa Barbara, has become a strong player in Internet messaging. The company has many corporate customers for its mailbox technology and has begun to expand its messaging services to wireless devices.

Analysts applauded the deal because there is little overlap between the two firms’ customer base and because it helps Phone.com broaden its offerings beyond the minibrowser.

“It’s a good step for them because it gives Phone.com more services they can offer over the current wireless networks,” said Tim Burke, a wireless industry analyst at Edward Jones.

Observers also were impressed by the recruitment of Doug Listwin, who until Tuesday was a top executive at Cisco. Listwin left Cisco to become president and chief executive officer of the as-yet-unnamed company created by the union of Phone.com and Software.com.

Phone.com’s current chief executive, Alain Rossman, will be chairman of the board and an executive vice president. John L. MacFarlane, Software.com’s founder and CEO, will be an executive vice president.

Both companies are young, having gone public in June 1999, but both have seen their stock prices rise sharply in the last year. Both Phone.com and Software.com have also cashed in on their high share prices, using their stock as currency in a series of acquisitions.

In March, the two companies hit 52-week highs in their stock prices, with Phone.com peaking at $208 per share, and Software.com topping out at $155.

Under terms of the merger, shareholders of Software.com will receive 1.61 shares of Phone.com stock for each of their Software.com shares--a value of $146.75 per share.

Phone.com reported last month that its fiscal fourth-quarter loss increased to $165.6 million, up from $6.79 million a year earlier. Sales soared to $28.7 million, up from $6.72 million.

Software.com also is losing money. It recently said its second-quarter loss widened to $11.1 million, compared with $2.87 million for the year-ago period. Revenue jumped more than 300% to $29.5 million, up from $9.05 million for the second quarter in 1999.