The phaseout of Cobalt comes at a time of considerable flux in the Linux server market. With Red Hat changing its licensing terms, many hosting companies are considering alternative Linux distributions. The discontinuation of Cobalt is bound to prompt further shift in market share among Linux vendors.

Cobalt products became popular with hosting companies for their compact 1U design and user-friendly interface. The acquisition of Cobalt Networks in September 2000 marked a strategic shift for Sun. At the time, the all-stock deal was seen as providing a rapid entry into both the Linux and server appliance markets, and a combination of two of Microsoft’s most successful competitors.

But Sun struggled to position Cobalt, and new products from hosting automation vendors made accessible control panels more widely available. Meanwhile, the focus of hosts interested in high-density servers shifted from 1U rackmount units to ultra-thin blade servers. In January Sun took a $1.6 billion charge to its earnings to reflect the decreased value of the Cobalt acquisition.