Not bad for a 16-month-old company that has never earned a profit and has given away most of the software it has created. Not bad for Netscape co-founder Jim Clark, who, by day's end--when the stock price finally settled at a more reasonable $58.25--was worth $565 million. And not bad for fellow co-founder Marc Andreessen, the 24-year-old programming tyro, whose stake made him a millionaire 58.25 times over.
So what exactly was America buying into with such enthusiasm last week? The Internet, of course, that boomtown of the wired world. "The Internet has gone to Main Street," said analyst Kathleen Smith of Renaissance Capital, a Connecticut firm that evaluates initial public offerings for institutional investors. Netscape was "the hottest deal we've ever seen. Friends we never thought we had were calling us, asking us how they could buy shares."
Netscape, based in Mountain View, California, makes an essential piece of Internet software known as a browser, which can be thought of as the 3-D glasses your computer wears to pick up images, sounds and text on the World Wide Web, the multimedia portion of the Internet. Netscape controls a cozy 70% of the market for browsing software.
Investors are increasingly keen to buy into Internet-related companies, but have had few opportunities. Four such companies have gone public: Internet-access providers Netcom On-line Communications Services, Performance Systems International and UUNet Technologies; and another Web-browser maker, Spyglass. All are performing extremely well because the Internet is regarded as the next stage of the information revolution. Now that computers are being linked around the globe, techno-happy investors are trying to stay ahead of that curve and find the next big company. Netscape, says Lise Buyer, technology analyst at T. Rowe Price, "has the potential to be as important to the Internet as Microsoft's dos was to the personal computer."
One reason Netscape's Navigator dominates the browser market is that the company gave it away to home and school users, which in turn attracted Web-based businesses. Commercial users pay for the Netscape software that makes them accessible to browsers-another market that Netscape controls, for now. But here comes Microsoft, which has its own designs on the Internet. The software giant learned last week that the Justice Department's antitrust investigation would not delay the Microsoft Network, its ambitious online service. The network software comes bundled inside Windows 95, Microsoft's new operating system, which is supposed to be shipped to dealers on Aug. 24. Anyone who installs it will find a Microsoft Network icon on the computer-screen desktop. Click on the icon, and, assuming the computer is attached to a modem and a phone line, voile!, you're on the Microsoft Network.
That's where the potential monopoly problems lie. By one estimate, as many as 30 million people will upgrade to Windows 95 by year's end. If only 10% of them subscribe to the network, Microsoft's service will rival that of America Online, the largest of the commercial providers of online services. Justice Department antitrust lawyers say they have yet to decide whether to take action against Microsoft; they are still in the discovery process and plan to seek more Microsoft documents.
The more sobering news, though, for anyone who bought Netscape stock is that Windows 95 comes with its own browser, the Internet Explorer, a piece of software that, like other Microsoft programs, may smother all competitors. Microsoft's browser allows users to see anything on the Web that a Netscape user can see. But Netscape users won't be able to sample the library of multimedia offerings that is expected to be stored on the Microsoft Network, which has its own proprietary design. "Netscape's millions of browsers won't be a threat to us for very long,"predicted Naveen Jain, a Microsoft spokesman.
Yet the battle will be hard fought. Netscape has as many as 7 million users on the Internet. Most of them get online through independent access providers and schools, rather than large commercial services and are drawn to the Net precisely because it's neither owned nor controlled by anyone. To many of these users, the notion that Microsoft chairman Bill Gates wants to dominate the Internet is blasphemy. Netscape also benefits from being smaller and more nimble than the Redmond, Washington, colossus. Netscape's management team is led by Clark, a former Stanford University professor who founded, then resigned from, the successful firm Silicon Graphics. Backing him up is James Barksdale, Netscape's ceo, who has held top jobs at AT&T, McCaw Cellular Communications and Federal Express.
But the best thing Netscape has going for it is its techies, most notably Andreessen, who, as a 22-year-old undergraduate at the University of Illinois, conceived the first graphical Web browser, Mosaic, at the National Center for Supercomputing Applications in the fall of 1992. That bit of software transformed the drab, black-and-white, hard-to-get-around-in world of the Internet into a colorful place and stimulated an explosion in new kinds of content, from Web-based magazines to online casinos. Mosaic, which is licensed by the university to customers, was also given away and gained an estimated 2 million users in a single year, doing as much to popularize the Internet as anything else in online history, with the possible exception of E-mail. Buyer says Netscape has "corporate vision, technology vision and proven operating vision. In terms of management, they've got everything you can ask for." They also have a company that when NASDAQ closed on Friday afternoon was valued at $2 billion.
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