Dow Jones Online News, Friday, February 06, 1998 at 09:54
NEW YORK -(Dow Jones)- Netscape Communications Corp., considering
options that include the sale of the company, is focusing on other deals
involving its World Wide Web site and software businesses, The Wall
Street Journal reported Friday.
The Internet-software pioneer is seeking to bolster its position in
the wake of a withering assault by Microsoft Corp. But anti-Microsoft
allies including Sun Microsystems Inc., Oracle Corp. and International
Business Machines Corp. are believed to be more likely to consider other
ways to financially support Netscape's Web-browser software, which
Netscape executives argue is a critical obstacle to Microsoft's
potential domination of Internet-technology standards.
The most immediate possibility, some people close to Netscape told
The Journal, is a deal to exploit the value of Netscape's popular Web
site by selling the service outright or broadening partnerships among
companies that are already affiliated with it. America Online Inc. and
Excite Inc. are among companies talking with Netscape about those
options.
Word Thursday of Netscape's discussions sent the company's shares up
14% in heavy Nasdaq Stock Market trading to $21.9375.
The flurry of activity illustrates the challenges facing Netscape,
Mountain View, Calif., as well as its continued strategic importance to
Microsoft's competitors and other Internet-oriented businesses.
Netscape's browser software has been losing market share to
Microsoft, but remains a counterweight to moves by the industry giant to
link its software in proprietary ways to Web publishing and service
businesses. The company recently responded to Microsoft's pressure by
making its browser free of charge to help stem the market-share
slippage, along with releasing programming code that could help other
companies enhance the software.
Netscape executives have discussed the possibility that a consortium
involving partners such as IBM, Sun and Oracle could help financially
support future browser development, and possibly integrate the Netscape
software into their own products. "You would have these three companies
taking a revenue-based interest in the success" of the browser, one
person familiar with Netscape's thinking said.
Neither Netscape nor the other companies would comment on any
discussions. But several analysts questioned the idea of a complete
buyout of Netscape, which has a market value of about $2 billion.
IBM, for example, isn't considered likely to spend that kind of money
for a business that its Lotus Development Corp. division is already in.
Sun and Oracle have strong sales forces that could potentially help sell
Netscape's products, but are already competing with Microsoft and don't
need the distractions of absorbing a company that could dilute their
profits.
"My personal opinion is that they are the No. 3 Internet player,
behind Lotus and Microsoft," said David Locke, an analyst at Volpe Brown
Whelan. "No. 3 players tend not to be very profitable."
Netscape's decision to make its browser free has increased its need
to exploit its Web site, which some industry executives say is the most
fertile field for discussions. Competition to create a major "portal,"
or central-destination site, on the Web has grown increasingly intense
in recent months.
Netscape's site ranks third in user traffic behind sites from AOL and
Yahoo Inc., according to a survey by measurement-firm Media Metrix, and
pulled in more total revenue last year than Yahoo. But Yahoo, Santa
Clara, Calif., is currently valued by the stock market at $3.2 billion,
about double Netscape's market capitalization before takeover rumors
boosted that company's stock.
Netscape has partnerships with all of the leading search companies,
including Yahoo, Excite, Infoseek and Lycos, to direct Internet traffic
to its site. David Simons, managing director of Digital Video
Investments, is skeptical that those companies could take over all of
the Netscape site, since that would involve so many interconnected
relationships among competitors.
AOL, which has an on-again, off-again relationship with Netscape,
declined comment. But one person familiar with the situation said the
companies have been talking for more than a year about trying to find a
way to work more closely together, including what he called a "major
strategic relationship."
Mike Homer, Netscape's executive vice president of sales and
marketing, insisted that the company has had no discussions about
outsourcing the management of the Web site to a single firm. But he
wouldn't rule out the possibility that Netscape could sell the Web site
to another company. "I'm not going to say anything about what might
happen in the future," he said. "Our business changes too rapidly."
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