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No, Netscape Isn't Throwing In The Towel

News: Analysis & Commentary: THE INTERNET


The takeover rumors have receded, and it's still standing

Two storms lashed Netscape CEO James L. Barksdale during the first week in February. First, an El Nino downpour sent a flood of water into the basement of his Palo Alto (Calif.) home. Then, after Netscape reported a shocking $88 million fourth-quarter loss on shrinking sales on Jan. 27, a torrent of rumors swept Wall Street. Weakened by the withering competition with Microsoft, analysts predicted Netscape Communications Corp. would seek refuge in a merger with an ally--perhaps Sun Microsystems, IBM, or Oracle.

Barksdale has shored up his domestic defenses with sandbags. And rumors of a takeover have receded. But the question remains: Can Netscape survive on its own? The company that launched the Web revolution cut 11% of its staff last month and stopped charging for its browser. That might halt the inroads of Microsoft's freebie Internet Explorer but sacrifices what had once been a $54 million-per-quarter revenue stream. Netscape's stock now fetches a fourth of its peak value of $85.50 per share.

PRODUCT PUSH. Barksdale insists Netscape can go it alone. "We'll make it not only as a viable stand-alone business but a very successful stand-alone business," he vows. But Executive Vice-President Mark L. Andreessen says Netscape could use a little help from its friends.

The plan is to focus on providing the software used to run corporate intranets and conduct business on the Net. Netscape's server sales and services accounted for $90 million of its $125 million in fourth-quarter revenues. Last year, it landed 875 new corporate deals. And 23 of the top 40 business Web sites run on Netscape software, according to a January survey.

Key to Netscape's success will be a slew of new products, including a Feb. 9 upgrade of a server for network administrators. Netscape is also releasing new E-commerce products for publishers such as The New York Times, consumer shops such as the Internet Shopping Network, and business-to-business commerce. But all those successes could be swept aside by the Microsoft juggernaut. The software giant is pushing quickly into the server market--including by throwing in basic Web-server software with its Windows NT operating system.

What would really help is some aid from the companies that have been past allies. But Barksdale may not be able to count on them. IBM, Oracle, Hewlett-Packard, and Sun were happy to support Netscape when it was the Internet upstart challenging Microsoft. Some of them may be less eager to help Netscape compete for their corporate customers. Most are writing their own Net-based software. And so far, no company has said yes to Andreessen, who has been asking for help funding a new browser for so-called network computers.

"We like there to be competition," says David Roux, an Oracle executive vice-president. "But it's not our business to subsidize other people's fights." Barksdale had better keep his sandbags handy.By Steve Hamm in San Mateo, Calif.

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