The Education Of Marc Andreessen
It was like a slow-motion train wreck. Marc Andreessen, 26-year-old co-founder of Netscape Communications Corp., was basking in last December's post-holiday glow when troubling reports began trickling in from Netscape's sales force. Instead of the big numbers he had hoped for, each report was more discouraging than the last. Corporate customers just weren't buying Netscape software fast enough.
By late January, the full extent of the damage was clear. Because of a huge fourth-quarter revenue shortfall, the company that had nearly turned the computing world upside down would report an $88 million loss and fire 400 of its 3,200 employees. The news was so bad that analysts began to question the Mountain View (Calif.) company's ability to survive.
What had happened to Marc Andreessen's charmed life? It was only four years ago that this big, apple-cheeked programming whiz kid left college in the Midwest and arrived in California seeking fame and fortune. With their Web browser, Andreessen and his Netscape cohorts launched the Internet gold rush. And, thanks to the company's initial public offering, his net worth soared to $171 million. At just 24, he appeared--barefoot and wearing a crown--on the cover of Time. Hyped as the next Bill Gates, he became a model for every brainy kid who dreamed of striking it rich on the Net. "He's the icon for his 20s generation--just as Gates is for his generation," says Eric Schmidt, CEO of Novell Inc.
But Andreessen has a problem. Gates has already chosen the next Bill Gates, and it's...Bill Gates. Not content just to be king of the PC realm, Gates set out two years ago to rule the Internet, too. Indeed, his move to give away much of Microsoft Corp.'s Internet software is working so well that it threatens to level Netscape. Nor has a convincing counterattack been mounted by Netscape. "I give them an A for putting together a solid technology strategy," says Dan Lynch, an investor in Net startups. "But unfortunately you need an A+. I don't think they appreciated the lengths to which Microsoft would go to crush them."
Now, Andreessen is in the fight of his young life. No longer the hot new programming wunderkind, he has been forced to grow up fast. During his brief tenure in Silicon Valley, he has learned just how quickly fortunes can change in his cut-throat industry. Now, he needs to prove himself all over again--and the company's fate rests in part on his ability to remake himself as a more mature, market-savvy manager.
Through most of Netscape's early days, Andreessen occupied the relatively insulated and cushy post of chief technology officer. But as its troubles mounted, Andreessen was promoted last July to executive vice-president in charge of Netscape's 1,000-person product-development group. The move gives him a crucial role in the company's battle for survival. Today, he's in charge of making the hard product choices required for Netscape to regain momentum. "Marc is extremely important to the success of the company," says Netscape CEO James L. Barksdale. "He has assumed a much bigger role, and we're depending on him to get the products out."
It's a big job, and it falls to Andreessen after an awkward and troubling period. A year ago, as the company's CTO and resident visionary, he felt sidelined by his absence of direct management responsibilities. Although deadlines were slipping and quality problems had crept into new products, Andreessen says he lacked the authority to get his ideas for change across to managers. At one point, he was so discouraged he could barely drag himself out of bed before noon.
But Barksdale was convinced Netscape still needed Andreessen's technical vision--and he took a chance by moving him into a post that would again make Andreessen central to the company. Whether the move will help fix Netscape remains to be seen. But Andreessen has rallied: He insists he's more committed than ever to saving Netscape from the maw of Microsoft. "I know what I'm doing now has a purpose and will have results," he says. "I'm in a role to do that. I wasn't before."
The shift comes at a time of stiff challenges for the adolescent company. Though revenues have raced to $534 million in the past 2 1/2 years, Netscape's share of the browser market has dwindled from 80% to about 60%. Meanwhile, Microsoft's share has zoomed from 5% to 40%. Netscape lags in the corporate E-mail business, and it faces fierce competition from giants such as Microsoft and IBM in key markets such as software for Web sites and E-commerce. It's no wonder that many analysts say Netscape would be better off selling out to a bigger player--such as Sun Microsystems Inc. or IBM.
Does Andreessen have the fire-in-the belly commitment of a Michael Dell or the survival instincts of an Andy Grove? Perhaps, but he seems to be hedging his bets. He says that if Netscape were sold, it wouldn't be so bad--if the buyer were a company that shares its goals. And in February, he unloaded 375,000 shares--or about 25% of his Netscape holdings--when the stock price was near an all-time low. Andreessen claims he's not bailing out, just diversifying his holdings. But, says Bob Gabele, an analyst at insider-trading tracker CDA/Investnet, Andreessen is sending exactly the wrong message to investors: "It's not a good sign."
Perhaps Andreessen is just being realistic. After all, he knows that a Netscape takeover or fluctuations in its stock price are beyond his control. So he ignores such issues--immersing himself in the job at hand. This blinder-style focus also helped him through the dark days of January. "The first thing you do is say: `Oh, s---!"' he admits. But he has long since sized up the situation rationally like the engineer he is at heart: "You think about what we need to do. It's a fork in the decision tree. It's a matter of figuring out what all the options are and what's the right path to take."
Two years ago, it looked as if Netscape's path would always lead upward. So it would be understandable if Andreessen were emotionally devastated. He says he's not. He swears he never believed the hype that surrounded Netscape. "What happened to me happened so quickly and was so far out of proportion to anything that would be considered reasonable that I treat it as an external phenomenon," he says in his rapid-fire delivery. He was happy to be a high-profile evangelist for the Internet--as long as it helped boost Netscape's fortunes.
FASTER TREADMILL. But Andreessen couldn't have guessed his glory days would be so brief. Indeed, he has had to grow up in Internet Time, a term first used to describe how quickly Netscape delivered new products (originally every six months, a breakneck pace). Bill Gates got to run Microsoft for more than a dozen years before IBM set its sights on him. For Netscape and Andreessen, the trip from phenom to potential has-been was over in a blink of an eye.
That phenom was the Marc Andreessen everyone thought they knew--the hamburger-chomping pop icon for the cyber generation. But just beneath the surface, there's a much more complex person--not so happy-go-lucky, not so easily typecast. More than anything, Andreessen is restless, impatiently jumping from one ambitious undertaking to the next.
Shortly after launching Netscape, he gave up software programming, a passion of his for years. He has become a fan of classical music--after working his way up the ladder through rock and jazz. Before, he was content being Netscape's CTO. Now, management is his focus. "Once he finishes with something, he just leaves it behind, like an old gym bag under your desk," says Netscape co-founder Eric Bina.
Andreessen doesn't exactly see it that way. For him, it's all about acquiring as much knowledge as he can as fast as he can in pursuit of the next Big Idea. But his first big idea will be hard to beat. As a student researcher at the University of Illinois at Urbana-Champaign, he took the lead in creating the first popular Internet browser, called NCSA Mosaic. Then, at Netscape, he conceived a new browser that added features normally found on operating systems such as Microsoft's Windows. From there, Andreessen was one of the first to envision intranets--communications networks that promise to turn companies into information dynamos.
In its race to create Internet services that can compete with Microsoft, Netscape is relying on Andreessen's fertile mind to come up with hot new products. Is he up to the challenge? There's no question he has grown tremendously in the past two years, often by absorbing painful lessons. Barksdale, for instance, once locked Andreessen out of a morning staff meeting when the night-owl youth had arrived late one time too many. It was meant as a joke, but it got Andreessen's attention. Now, Andreessen is one of the most punctual people on Barksdale's staff. "He's come a long way," says Barksdale.
Andreessen has acquired more grown-up tastes, too. The chubby 6-foot, 4-inch lad who dressed in shorts, T-shirts, and sandals in 1994 has shed about 30 pounds and now fancies Ermenegildo Zegna suits and Robert Talbot shirts. Greasy hamburgers and milkshakes are out, replaced by grilled sturgeon and chardonnay. And he has traded in his red Mustang for a more sober white Mercedes-Benz S600 sedan.
It's one thing to learn to dress well and show up on time and quite another to help save a troubled company. Some observers question whether Andreessen has the management skills needed for the job. After all, before his promotion last summer, he had never managed more than a handful of people. "In the Internet market, things are changing so fast," says the CEO of another Internet software company. "Marc's youth and inexperience are hard to overcome."
SHOWTIME. Others say it's time for the sometimes-cocky Andreessen to deliver the goods. "The challenge for Netscape is to live up to the story they've been telling everyone--that they were going to be the next Microsoft, they were going to put us out of business and become the next platform for the industry," says Nathan P. Myhrvold, CTO at Microsoft.
Andreessen never claimed he would put Microsoft out of business--but he boasted often in Netscape's early days that the Web would make operating systems such as Windows "irrelevant." Now, it is clear just how wrong he was. Indeed, with Microsoft's launch of Windows 98 and its integrated Web browser just two months away, Andreessen needs to put his self-improvement campaign to the test.
As the head of product development, he has a key role in implementing Barksdale's strategy of trying to get Netscape back on the profit track by shifting its focus away from the browser market. Instead, the pair want to concentrate on sophisticated software for running large corporate networks. Andreessen will also have to accelerate the rollout of a suite of E-commerce applications. And he is plowing resources into its new Netcenter Web site--hoping to turn what is already the top business site into the No.1 site for consumers as well.
Still, Netscape hasn't given up entirely on browsers. Andreessen championed the idea of offering its browser source code to all comers. It's a novel concept: By essentially sharing Netscape's intellectual property with the world, Andreessen is betting the company will be flooded with new--and free--ideas from outside software developers. The best would then be included in communications software packages for desktop PCs that Netscape will sell to corporate customers. The next several months will demonstrate whether the move succeeds. "If we don't pull this off," says Andreessen, "it will be our own fault."
"A STORM." To help Andreessen hone his skills, Barksdale has taken him under his wing. The two meet almost every Saturday for a working lunch where Andreessen usually raises a long list of ideas and issues. "The best lesson I learned from Jim is to apply a balance between urgency and patience," says Andreessen. "You set up a flow to people's lives so they're not always racing. Give them enough resources to do their jobs. Give them consistent direction."
Still, nothing could have prepared Andreessen for the wrenching decisions he has had to make in the past two months to realign Netscape's engineering organization. Hardest of all was cutting 20% of his expenses--and 150 people. "The worst thing you can do is try to gloss things over," he says, explaining how he broke the news to employees. So, he met twice with the entire engineering group in January and held two to three "brown bag" lunches a week for all comers. The face time has helped boost morale. "He's steering the ship through a storm," says senior programmer John Giannandrea.
Andreessen has remained close to the rank-and-file programmers since Netscape's early days. Partly, it's because he's a techie at heart. But it's also because he enjoys hanging out with people his own age. Case in point: his movie nights with pals. On a recent Friday, Andreessen and a half-dozen others, mostly from Netscape, sat in the second row at the Century Cinema in Mountain View and hooted at the plot twists in Palmetto.
If that sounds like a bunch of kids, it should. Having a laugh is still very high on Andreessen's "to do" list. How else could he handle the pressure of competing with mighty Microsoft every day? To lighten the stress on the job, he still resorts to self-mocking humor, like the time he came to a meeting wearing a Spandex outfit and roller blades after losing a bet with engineers that they wouldn't get a product out on time. And in stark contrast to Microsoft's legendary workaholic culture, Andreessen encourages his workers to limit office time to 50 hours a week.
Andreessen insists that obsessing over Microsoft's advancing guns does no good. So he makes the most of his own free time at the Mediterranean-style house he bought three years ago in Palo Alto. He lives there with his fiancee, Elizabeth Horn, a freelance Web-site designer. Horn has decorated the place with Turkish rugs, potted palms, a sizable collection of Buddhas, and a stunning, five-foot-tall Moroccan wedding couch made of white brass that serves as a daybed for the couple's three gravel-throated English bulldogs--Claiborne, Lily, and Milo.
If Andreessen's work life has become more structured, at home, it's still fun and games. A couple of weeks ago, on a lark, Horn dyed Milo teal--one of Netscape's logo colors. And the pair kick back by popping into their 36-inch Mitsubishi TV such B-movies as the John Woo shoot-'em-ups The Killer and Hard Boiled. Other evenings are spent engrossed in his-and-her Web surfing at side-by-side computers.
What they don't do much is go out on the town. That's because Andreessen is notoriously private and shy around strangers. On a recent Saturday, while Horn sat in their breakfast nook talking about their relationship, Andreessen puttered nervously nearby--cringing. "I have a huge amount of trouble with these personal questions," he said later. "It's a Midwestern thing."
Andreessen is from the very heart of the Midwest--New Lisbon, Wis., a village of 1,500 in corn-and-dairy country. He grew up 10 miles outside town on Castle Rock Lake. His mother, Pat, works in customer service at Lands' End. His father, Lowell, now retired, was a sales manager for Pioneer Hi-Bred International Inc. Andreessen has a jaundiced view of his dad's job: "It was an Amway kind of thing--farmers slowly going out of business on their family farms sell seed corn to other farmers slowly going out of business."
Don't ask Andreessen to talk more about his family--he clams up. The subject is so sensitive that he first declined to provide even the names of his parents or his brother, Jeff, a history major at the University of Wisconsin. Since leaving the Midwest in 1994, Andreessen has had little contact with his family. His brother insists "there is no animosity between any of us." Still, he is troubled. "The last time I spoke to him was four years ago when he went off to California," says Jeff. "There's resentment. I'd like to hear from him."
Jeff describes their childhood as a happy one. Marc discovered programming at age 12; recuperating from an operation, he persuaded his parents to buy him a Radio Shack computer. Soon programming became his passion. "It's a way to be creative and express ideas in a way you can touch," he says. It also helped relieve the boredom of growing up in the sticks. "He made it clear he was going to get out of town when he graduated," recalls childhood friend Richard Hoile.
First, Andreessen established himself as a top student at tiny New Lisbon High School (student population: 240). He annoyed some teachers by questioning the relevance of their assignments. Once, an English teacher asked for a collage on the topic of love, and Andreessen objected that it was too childish. "Some people thought he was cocky. I thought he was just self-assured," says social studies teacher Eugene Gibson.
At the University of Illinois, Andreessen got a programming job at the National Center for Supercomputing Applications, a university-affiliated research center. Earning $6 an hour, he learned about the Web and with colleague Bina created a prototype for the Mosaic browser. Others elsewhere were working on browsers, too, but according to Tim Berners-Lee, director of the World Wide Web Consortium and the creator of the Web, Andreessen understood how to appeal to consumers. "He made it simple to install and use," says Berners-Lee.
It wasn't long before Silicon Valley beckoned, and Andreessen headed West. He landed at Enterprise Integration Technologies (EIT) with a salary of $80,000--unheard of for a starting programmer. He often coded alone at night as he listened to opera at full blast and downed Pepperidge Farm Goldfish. "He reminded me a lot of [Apple Computer Inc. co-founder] Steve Jobs," recalls Marty Tenenbaum, who ran EIT and now is chairman of the CN Group, an E-commerce startup. "He was intense, driven, and focused."
One day, a little over a month into his West Coast adventure, Andreessen got an E-mail message from James Clark, the founder of Silicon Graphics Inc., who knew about Andreessen's role in creating Mosaic and wanted to talk to him about going into business together. In a series of brainstorming meetings, they noodled over a concept for a Nintendo online game service--but dropped it. Other ideas came and went. Then, at about 1 a.m. on Mar. 25, 1994, after a leisurely dinner and several bottles of burgundy, Clark left it up to Andreessen to decide what they should pursue. There was a pregnant pause. "We could always create a Mosaic killer--just build a better product and build a business around it," Clark remembers Andreessen saying.
WHITE PAPERS. To pull that off, Andreessen and Clark moved fast to round up the core engineering crew at NCSA--and then raced to produce a commercial browser before anybody else could. During his first six months at Netscape, Andreessen played the role of unofficial product manager, but once Netscape Navigator was launched in December, 1994, Andreessen became full-time visionary and evangelist--with the title of CTO.
The job suited him fine. He got paid to think about how Netscape could turn the Web from a chaotic experiment into an exciting new medium for consumers and a powerful communications tool for corporations. He wrote long white papers chock-full of strategic technology plans. At conferences and PR events, he spread the word about the Web and Netscape.
The payoff came on Aug. 9, 1995, with Netscape's IPO. Andreessen woke up late, as usual. He logged on to his computer. Netscape's stock had been priced at $14 but hit $75 before closing at $58. "I saw the stock price and went, `Eek!"' says Andreessen--who owned 1 million shares before a 2-for-1 stock split six months later. "We thought the IPO would be successful. But we didn't dream it would be that successful."
Then, gradually, Andreessen's work became stale. In the early days, being Netscape's CTO was a crucial role. Andreessen charted the company's long-term technology direction. And engineering managers listened to his ideas because he was a founder. As Netscape grew up, however, the focus was more on getting products out the door and into the hands of corporate customers, and Andreessen was troubled that his job was less vital.
By last spring, the Internet guru had fallen into a slump. Often on the road, Andreessen felt out of touch with managers making key product decisions. With no management responsibilities of his own--the two top engineers reported directly to Barksdale--Andreessen was "on a trajectory to become a figurehead," says Eric Hahn, a former engineering manager and now Netscape's CTO. He spent his days meeting with customers, giving interviews, and making speeches on the wonders of the Internet while having less and less to do with tackling the problems Netscape was facing. Admits Andreessen: "I wasn't doing much, and there wasn't much for me to do."
Indeed, it was no longer clear what he was supposed to be doing. "Part of it was, my personality had changed. I had more ideas about how we should be running the company, but I wasn't in a position to change things," he says.
Meanwhile, to others, Andreessen seemed distracted and adrift. "Many of the newer employees had never met him, much less interacted with him," recalls Hahn. Quincy Smith, Netscape investor relations director and a friend, says Andreessen was obviously disturbed. "He was frustrated. Outside of work, he didn't talk about Netscape as much," recalls Smith. Andreessen remembers it like this: "More and more of my days I was shifting into a pattern of sleeping until noon or later and rolling in to work at 2 and heading for home at 6."
Barksdale noticed, too--but even as Andreessen floundered, he continued to believe deeply in him and his abilities. So Barksdale fixed on a strategy aimed at recharging Andreessen by giving him a more important job while simultaneously addressing nagging problems in engineering.
Netscape was losing its technology lead over Microsoft, particularly in browsers. And the company's two top engineers were in transition--one, Hahn, was going on sabbatical, and the other, Rick Schell, had asked for a less intense job. So Barksdale created a single engineering group and put Andreessen in charge of it--backing him up with a cadre of seasoned engineering managers.
Is Barksdale's strategy a stroke of genius or an act of desperation? He insists no one at Netscape has better technical know-how than Andreessen. And he is convinced that, with guidance, Andreessen will succeed as a manager. "Marc was frustrated with the problems in engineering, so I said if he's so frustrated, why not let him do it," says Barksdale.
Andreessen knows he still has a lot to learn. And that often means looking back at the mistakes Netscape has made. It tried to do too many things at once--assuming it would succeed at everything. Andreessen now practices the art of the possible. He's putting most of Netscape's engineering resources into a handful of major products. Andreessen and his colleagues also failed to spot the potential for turning the Netscape Web site into a marketplace of content and services to rival the popularity of Yahoo! Inc. and America Online Inc. It wasn't until last October that they launched Netcenter, their content-oriented Web site. "Our biggest mistake was we didn't think of this two years ago," admits Andreessen.
Will the latest strategy be enough to stave off Microsoft and save Netscape? It's a long shot, according to analysts and industry players. Despite Netscape's risky giveaway of its source code, most predict it will lose browser market share even more quickly once Microsoft comes out with Windows 98. And in servers, Microsoft keeps upping the ante by adding new features to basic servers it gives away with its Windows NT operating system.
To stay in the race, Netscape will have to bolster its own server technology while holding prices low enough to keep corporate customers in its fold. Mary McCaffrey of BT Alex. Brown Inc. says she expects more bad financial news for the next couple of quarters. Longer term, there's a ray of hope. "If they knuckle down and get focused on the strengths of their product line, they've got a shot at turning this around," she says.
RELENTLESSLY POSITIVE. Andreessen's transformation from a smug dreamer to a realistic doer has been closely monitored by others in the industry. Patricia Sueltz, general manager of Java software for IBM, has noticed that Andreessen no longer talks about Netscape going it alone. Instead, he's open to collaboration. "He's a more pragmatic businessman," she says. John Doerr, a venture capitalist with Kleiner Perkins Caufield & Byers and an Andreessen mentor, says Andreessen isn't a wild-eyed rebel anymore. "He has retained his fresh point of view about what's possible," says Doerr. "But now he listens much better. He has grown a lot, and it's not over."
Andreessen does not indulge in self-analysis--unless you press him. What does he feel about being so rich--the $171 million peak--and then seeing his net worth drop by more than two-thirds, to about $50 million? "Money matters," he says. "But it's not a big focus. It's not the motivator or even the measure of my success." Why is he so relentlessly positive in the face of Netscape's problems? "I don't waste time being depressed," he says. "If you're unhappy, you should change what you're doing." What matters most is proving himself all over again by becoming a good manager and learning how to build a company. "I need more raw experience," he says. "I've read and watched a lot of things, but I haven't done a lot of things."
Outsiders foresee an important role for Andreessen in the computer industry--whatever happens with Netscape. "The Internet is still a raging pagan beast. It's not yet easy. Marc could make it easier," says David Siminoff, a portfolio manager at Capital Research in San Francisco. And while it's unlikely that Andreessen will change the world again with another Mosaic-like discovery, Mary Meeker, an analyst at Morgan Stanley Dean Witter & Co., says: "He'll be a great CEO--5 to 10 years from now."
For somebody as restless as Andreessen, a decade is a long time to wait to be anything. But maybe the young man who was always in a hurry is now ready to learn another vital life lesson: the virtue of patience.