Netscape Loses Its Dominance

A quick tip for all the seniors going through job recruiting right now: Don't even think about sending a resume to the folks at Netscape Communications Corporation.

For several years, Netscape has been one of a handful of tech firms to really shine among both Wall Street analysts and the bloodhounds of the Fourth Estate. Netscape, along with such darlings as AOL and Pixar, enjoyed very positive press while seeing its initial public offering soar to meteoric levels.

All the buzz around Netscape portrayed the company as a real winner. The company enjoyed a 90 percent share of the Web browser market at one time. Competitors like spyglass and Microsoft acknowledged that Netscape had a one-to-two-year research and development lead--a massive advantage in the Internet industry.

At the same time, the firm's employees became both rich and famous. Vice President Marc Andreessen was a Horatio Alger for the 1990s, parlaying the fruits of an eight-dollar-an-hour campus coding job into a personal net worth in the hundreds of millions of dollars. At one point, Netscape banned real-time stock tickers from company computers, as millionaire employees spent the days watching their net worth increase with the value of their options.

This rosy portrait of America's next "insanely great" company, however, seems tattered in light of recent events. Arch-rival Microsoft enjoys near-parity in the browser market, despite mounting scrutiny from Janet Reno's trustbusters. Meanwhile, Netscape saw its 1996 profits of $20 million turn into a devastating 1997 loss of $115 million.

Last week, Netscape laid off almost a tenth of its workforce in a cost-cutting action, a joint venture with industry giant Novell was canned, and the company has cut back much of its research into newer technologies, like Java. Now, Once-mighty Netscape finds itself the target of buyout rumors, as major players AOL, Sun and Oracle all consider buying the former browser champ.

What went wrong with Netscape? The most obvious setbacks to the company's financial plan have come from the devastating competition of Microsoft. As I discussed in this space a few weeks back, it's very likely that Bill Gates and company have been playing unfairly and uncompetitively with Netscape, among others.

Opinions of propriety and monopoly aside, it's plainly clear that, by giving away its own Internet Explorer (IE) product, Microsoft created a great answer to Netscape's Navigator. IE is no longer a long-shot competitor to Navigator; it is the only real rival, and what's more, it's about to overtake Netscape's offering.

Most industry pundits will tell you that Navigator is a superior product, if only marginally so. But Microsoft's price point is a winner.

Why should a corporation shell out $50 Per Computer for a copy of Netscape when IE comes preloaded on the PCs they purchase?

As part of Netscape's restructuring, the company is making Navigator available at no cost, even to commercial users. (Previously, only non-profits and academic users got freebie status). The company sees this both as a way to get on more desktops and to allow outside developers to modify and improve their product at no cost. The theory goes that Netscape will make more on server software and service contracts this way, which is where the real money lies in the market.

Even this move, however, seems to me to be too little, too late for N e t s c a p e . Microsoft has a second advantage over its competitors: IE is well-integrated into both Windows and its flagship Office product.

Netscape may be great by itself, but IE's hooks into Word and Excel let businesses integrate documents with the Web with relative ease. Look for cross-product links to be the real "killer application" in the browser market.

Besides, keep in mind that business drives software sales, and MIS departments decide what goes onto company computers, not users themselves.

Netscape's popularity among users won't mean much if MIS staffers can put an integrated, easily set-up software bundle which includes Windows, Office and IE on all computers.

Whether you like Microsoft or hate it, it may be time to take a look at IE. Unless Justice moves fast, Netscape's days look numbered from this end.

Kevin Davis is an independent computer consultant and student director of HASCS's Advanced Support Team. You can reach him at ksdavis@fas.harvard.edu.