Netscape Communications

Netscape Communications

Fact File:

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Founders: James H. Clark and Marc Andreessen.

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Distinction: Rewrote rules for Net navigation and initial public

offerings.

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Primary Products: Internet browser, Web portal, online

development tools.

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Annual Sales: $447.8 million.

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Number of Employees: 2,936.

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Major Competitors: Lycos, Microsoft, Yahoo!

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Senior Vice President & General Manager, Netscape Netcenter:

Jim Martin; Senior Vice President, Netscape Enterprise Group:

Steve Savignano.

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Headquarters: Mountain View, Calif.

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Year founded: 1994.

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Website : www.netscape.com

In the beginning, a trip into cyberspace was no piece of cake. Your

modern crawled along. You needed expertise in mysterious electronic

procedures, such as FTP and TelNet. Your connections failed constantly,

and when they didn't, your computer crashed. The early Net was

undeniably great, but it also was not ready for prime time. It didn't get

there until 1994, when Tim Berners-Lee and researchers at the University

of Illinois unveiled a new way to convey data online. They developed a

new software program dubbed "Mosaic" that helped everyone access it.

The pioneering combination already paved the way for everything—

from America Online to online banking. It also led directly to Netscape

Navigator, a commercial version of Mosaic from its original developers. A

Fortune computer executive immediately took the burgeoning cybercommunity

by storm—because his product worked as advertised, could be

downloaded for free from the Web, and was the only player in a game that

suddenly had everyone's attention.

More than 6 million copies of Netscape's new application were put

into use within six months of its availability. And the company—much like

the Web—took off. Less than 10 months later, it executed one of the most

extraordinary initial public offerings in Wall Street history. Five million

shares of its stock went on sale at $28, double the initial estimate. And in

one day the stock soared as high as $78 before closing at $58. The

company turned its first quarterly profit four months later, the share price

reached $170, and market capitalization hit an astonishing $5 billion.

Netscape responded by enhancing the online site that its browser pointed

new users to automatically, quickly making it one of the Web's most

visited. It also kept producing updates of the browser itself and related

products aimed at businesses and Internet developers.

By its second birthday, some 38 million individuals were using

Navigator and the business world's top companies were commercial

clients. This naturally caught the attention of Bill Gates and his crew at

Microsoft, which answered with a similar application of their own. The rest,

as they will be saying for years, is history.

Netscape was founded in April 1994, a few months after Dr. James

H. Clark was unceremoniously forced out of the computer systems

company that he started 12 years earlier. Angry with his treatment at the

Mountain View, Calif.-based Silicon Graphics, and in search of new

challenges, Clark hooked up with 23-year-old Marc Andreessen from the

University of Illinois on the recommendation of a friend. Andreessen was a

creator of Mosaic, the new Web-accessing software developed at the

university's National Center for Supercomputing Applications. He had left

the Urbana-Champaign campus for Silicon Valley after calls to

commercialize the graphical interface browser fell on deaf ears. Like Clark,

he now felt he had something to prove.

The two hit it off immediately. Their first idea, a venture to put

Nintendo games online, didn't pan out. Andreessen then suggested that

they develop an application to compete with Mosaic, an idea he had

previously rejected out of hand. Clark, impressed with the early Web's

possibilities, enthusiastically agreed. They recruited much of Andreessen's

programming team from the original project, and a round-the-clock effort

kicked off in new offices not far from Clark's old Mountain View stomping

grounds. By October they posted an experimental version of their

"Netscape Network Navigator" on the Web, and online denizens began

eagerly downloading the exciting new software "available for all popular

desktop environments."

Much like a lot of software developed during the early days of the

Internet, Netscape's products were based on so-called "open standards"

that worked with virtually any operating system. Coupled with a price that

started at $39 9but was quickly dropped to nothing), it proved a perfect

fit. Navigator was a bona fide hit before the company's first anniversary.

And it brought in James L. Barksdale—former chief executive at AT&T

Wireless Services—to guide it to the next level as president and CEO. The

future looked so bright, in fact, the company also decided to go public

even though it was just 16 months old and had never shown a profit. The

resultant initial public offering on August 9, 1995, was one of the most

successful that the stock market had ever hosted. Netscape followed with

its first profit, an updated browser, and a press release announcing that its

products were now used by 15 million people around the world and more

than 70 companies in the Fortune 100.

The roll continued during 1996, when the stock split and AOL began

edging further onto the Web by officially making the Netscape browser

available to its 5 million customers. Quarterly revenues from ads on the

Web site and business-based products increased more and more, and by

June Netscape's 38 million customers led it to proclaim Navigator "the

world's most popular PC application." In the fall, its reached an astounding

$100 million—representing a 329 percent boost over the previous year.

Clearly, the Web was shaping up as a powerful economic and cultural

force, and Netscape was in the forefront in both areas.

As the rapid growth of the Web's raucous period continued through

1997, tales of Netscape's extraordinary success—and those of other online

pioneers like America Online, Yahoo!, and Amazon.com—certainly did not

go unnoticed. Potential competitors who suddenly found themselves on the

sidelines of the biggest gold rush since the actual 1849 Gold Rush

hurriedly developed strategies to catapult them into the game.

Unfortunately for Netscape, Bill Gates and Microsoft zeroed in on the

browser market.

It was obvious from the start that Microsoft considered its new

Internet Explorer central in its belated attempt to conquer cyberspace. It

took the aggressive approach in ensuing marketplace battles, nonetheless.

Microsoft made many enemies and rapidly brought on the first in a series

of legal challenges that grew more serious over time. Netscape, unwilling

to back down from the threat to a business that it almost singlehandedly

created, tried ramping up for the bruising Browser War. For a time, Clark,

Andreessen, and Barksdale managed to match their rival from Redmond

upgrade for upgrade. Both browsers matured so similarly, in fact,

arguments about their relative merits came to resemble those over Pepsi

versus Coke.

But the continuing assault took its toll. By the time 1997 came to a

close, Netscape found itself facing a $115.5 million net loss. It responded

by forming a new division that would focus on making Netcenter the Web's

leading hub site or "portal". It added news headlines, discussion groups,

networking tools, and "a marketplace where users can shop for popular

item such as books, music, travel services, flowers, discount products,

software, and much more," as a press release touted. It all proved too

little too late, though. With Microsoft usurping more and more of the

browser, market, and other sites such as Yahoo.com, Amzon.com and

aol.com also vying to become top portal Netscape was hopelessly

outflanked.

The inevitable arrived in an announcement on November 24, 1998.

AOL—Netscape's erstwhile partner and competitor—had agreed to acquire

the browser firm in a "stock-for-stock, pooling of interests transaction"

that increased in value over time to around $10 billion. Closing was set for

the following spring. America Online took great pains to emphasize that its

employees would be welcomed into the parent company. Yet everyone

who knew Netscape knew that it would never be the same. Netscape's

portal site surpassed 13 million members early in 1999, but for the first

time Internet Explorer passed Navigator in market penetration.

The Web community was generally down on the AOL acquisition, and

things were looking rather bleak for the team from Mountain View. Most

critics thought it only coincidental that the sale was announced and

consummated just as the U.S. Justice Department was filling its industryshaking

browser-based antitrust suit against Microsoft, but they couldn't

decide whether it helped or hurt the government's case.

Some of the pessimism inside and outside of Netscape was alleviated

when Marc Andreessen was named America Online's new Chief Technology

Officer. And observers generally approved when AOL announced a new

organization that integrated both companies, a new alliance with Sun

Microsystems that used Netscape to boost its e-commerce performance,

and a new pledge to keep developing and releasing updated browsers. But

the mood soured when AOL announced that around 1,000 positions would

be eliminated equally from Netscape's forces and its own to reduce what it

called "job redundancies."

New browsers did indeed arrive at first, and they generally continued

matching Microsoft feature-for-feature. Netcenter registration kept

climbing as well, but within two months the Sun alliance was proving

fractious—particularly to those who supported Netscape's commitment to

open standards and multiplatform software. Delays in an additional

browser updates also began taking their toll, and suddenly almost no one

was happy. In September, co-founder Andreessen found the situation no

longer palatable and left to start another firm.

Things seemed to pick up in 2,000 with Netcenter registration

soaring to 25 million, along with the Netscape 6 browser grabbing good

reviews. But Netscape's market share had by then fallen to 30 percent,

and an existing agreement between Microsoft and AOL ironically still made

Internet Explorer its default browser. No matter the eventual outcome,

though, Netscape's pivotal role in Internet history already has been sealed.