The client browser market is no more, long live back-end applications, seems to be the mantra of Netscape Communications Corp as it fights back against the might of Microsoft Corp. Netscape suffered, according to vice president of international marketing Linda Lawrence, only a blip in its fourth quarter results, reporting net losses of $88.3m, against profits last time of $8.2m. While this was unquestionably due to competitive pressure from those guys up North – Lawrence cannot even bring herself to say the word Microsoft – and the need for Netscape to give its browser away for free (CI No 3,332), Lawrence insists this was the company’s first blip in 12 consecutive quarters. The poor fourth quarter results were also due to the company’s incubating two new businesses and migrating its browser strategy. Given all this, Lawrence says, the company barely missed a beat.
By Joanne Wallen
In spite of the controversy generated by Microsoft giving its Internet Explorer browser away free, and the on-going court case surrounding its aims to embed the browser into the Windows operating system, Lawrence says Netscape still has around 68% of the browser market today, and she claims there are early indicators that this share is now rising again. The company whose share price shocked the world back in 1995 as it climbed to more than $100, valuing Netscape at some $3,9bn, has had to face the reality of the Microsoft machine in the last year or so, and today’s market capitalization is less than half the 1995 high at $1.8bn. Nevertheless, Lawrence claims the company has a three-pronged strategy for the future, including an affordable way to compete with Microsoft. This affordable competition, she says, was the rationale behind the company deciding to give its browser away free, and more importantly, behind it deciding to take its crown jewels, the source code, and make it available to everyone on the internet. The idea is that giving out the source code will enable developers all over the world to not only modify the browser for their own use, but more importantly, enable the company to harness the creativity of the 45,000 developers worldwide that subscribe to Netscape’s DevEdge program. The intention is that these developers will build applications using Netscape’s browser as a front end. Independent software vendors will be able to add the Netscape browser to their own applications and ship it to their customers as part of their own product. However, although Netscape admits that it will now get zero revenue from its Communicator client, it still expects to make money on Communicator Pro, the server product which offers enterprise features including central management from a single console, access to mainframe host data and calendar facilities. Netscape says most large enterprises that use the free client product, buy Communicator Pro.
Enterprise server focus
The second prong in Netscape’s strategy is its enterprise servers and services, which it says it runs on the model of a Baan NV, Oracle Corp or SAP AG, providing both software, support and professional services. Revenue from this business was $92m in the fourth quarter of 1997, up from $52m for the same period in 1996. Following the company’s acquisition of Kiva Software Corp last year, the intranet, extranet and internet applications server company (CI No 3,297), and of electronic commerce firm Actra Business Systems LLC from General Electric Information Services (CI No 3,285), Netscape claims to have a full product line for building customized web applications including intranet and extranet, electronic commerce and large scale messaging applications. Lawrence claims no other company offers a single architecture with the full range of applications offered by Netscape. She says last year, the company’s target was to gain 700 design wins, that is to say companies that change their architecture to build web applications based on Netscape’s servers, and from June to September last year it had already won 900 of these, 400 of which were outside the US. Lawrence says this is an indication of where the company’s future revenue streams will come from.
Taking the battle on-site
The final part of the company’s strategy is Netcenter, Netscape’s online service, which it describes as the most commercially successful web site. The company apparently invested some $100m in building Netcenter over three years, and it is now generating $100m a year in revenue from advertising and transaction fees. So successful is it, that last week Netscape announced it was creating a new web site division specifically to run Netcenter and develop it as one of the major hubs on the internet (CI No 3,376). The company shows no signs of lying back and taking whatever the ‘guys up North’ throw at it. Lawrence says there are many Microsoft contracts coming up for renewal in the coming months, and Netscape will be in there aggressively going after the business. Netscape says it is important to understand the danger Microsoft poses. Its predatory practices have erased a whole industry, Lawrence says, referring to the demise of the paid-for browser business. The reason the US Department of Justice, the European Union and the Japanese justice department are all so concerned about Microsoft, is the need to preserve choice for the consumer, and Netscape is determined to be around long enough to provide that choice.
