AOL Turns Attention to Keeping
Netscape's Employees, Customers
The Wall Street Journal, November 27, 1998
by Kara Swisher & Thomas E. Weber
America Online Inc. cut a deal that rewrote the map of
cyberspace. Now comes the hard part -- keeping
employees and customers of Netscape Communications
Corp. from jumping ship.
AOL's success in reassuring those two constituencies
during the next few weeks is likely to determine the
success of the $4.2 billion Netscape acquisition. Some
Netscape workers and customers are clearly worried
about how the takeover will affect them, and have plenty
of alternatives in the form of job offers or competing
Internet software.
AOL, though hugely successful
among consumers, has little
experience in selling software,
particularly to a corporate
audience that is a big focus for
Netscape. AOL's online service
also has a low-brow image and a
proprietary format that aren't
fashionable among the Internet
cognoscenti at Netscape's
Mountain View, Calif.,
headquarters. The possibilities of culture clashes with
AOL of Dulles, Va., and layoffs, seem real indeed.
"This is the last thing I ever thought would happen,"
says one Netscape engineer, who spoke on condition of
anonymity. "I mean, AOL buying Netscape? It's unreal to
a lot of us."
Transition Plans
AOL executives are well aware of the issues. On
Monday, Chief Executive Steve Case and President Bob
Pittman will visit Netscape's headquarters in an initial "all
hands" meeting to help answer employee questions. Mr.
Case also sent out a reassuring e-mail to Netscape
workers when the deal was announced.
"We are committed to maintaining Netscape's
headquarters in Mountain View and we're even more
committed to maintaining the kind of culture that has
made Netscape such a successful operation," Mr. Case
wrote.
AOL has declined to discuss details of its transition
plans. But people familiar with the situation say Barry
Schuler, AOL's president of interactive services, will lead
a transition team that will decide all issues of integrating
the company's Web properties.
Though people issues are sensitive in all mergers, AOL
faces special challenges. Competition for top talent in
Silicon Valley is intense; executives from other
technology companies privately say they are making
lists of Netscape employees that they would like to hire
away.
"It's the $62 billion question," one Valley veteran says.
"Do the real cool guys at Netscape want to work for
AOL?"
Netscape, which once had its pick of the best and
brightest, already was struggling to hold onto top
programmers amid a withering battle with Microsoft
Corp. A sign in a Netscape hallway offers employees a
$1,000 bounty for landing the right prospects: "Building
a great company requires three things: People, people,
and people," the sign reads.
AOL's Big Asset
AOL, while it has an image problem with some Netscape
employees, also has a big asset -- the perception of
being a winner. In selling against Microsoft, Netscape
perpetually ran up against the fears that it might not be
around in a few years. AOL doesn't face that problem;
partly for that reason, Netscape Executive Vice
President Mike Homer says, feelings about the takeover
inside the company range from "wildly to cautiously
optimistic."
"A lot of us were wrong about AOL," Mr. Homer says.
"We know now that there is a lot we can learn from
them."
To retain Netscape customers, AOL has to reassure
them that it will continue to improve the Web-browser
software and electronic-commerce programs it is getting
as part of the deal. That is one reason AOL signed a
side deal with Sun Microsystems Inc., which will help
develop and jointly market some Netscape products.
Another challenge is that Netscape's biggest customers
include Internet-service providers that compete with
AOL. But some industry executives predict most ISPs
will keep distributing Netscape's browser, as long as
AOL seems to be treating AOL's online service and
other customers equally.
"The fact is that everybody needs
to learn to live with competing and
cooperating with partners at the
same time," says John Sidgmore,
head of UUNet Technologies, an
MCI WorldCom Inc. unit that provides Internet dial-up
facilities and other services to AOL, rival Earthlink
Network Inc. and others. "We compete with Earthlink,
yet we sell them capacity. They've learned to live with
that."
An Open Approach
One vital step, analysts say, will be to avoid any
impression that AOL wants to create closed technology
standards. The core AOL service always has had
proprietary elements; it requires members to install AOL
software that includes a browser to log onto the service,
and many customers never venture onto the wider
Internet.
Netscape, by contrast, has built a community in its
Netcenter site that is open to any Internet user with any
browser. It also had embarked on a course to solicit
other programmers' help in advancing Navigator, by
publishing the underlying source code used in creating
the product. Keeping this open approach alive will be
critical to retaining many customers, as well as
Netscape employees.
"If AOL were to use the AOL approach ... they will
destroy a $4 billion company," says William Schrader,
CEO of PSINet Inc., a Herndon, Va., company that
supplies customers -- including AOL -- with
Internet-communication services. "They have an
opportunity that they can only screw up by applying the
cloistered approach that AOL is well-known for."
Still, AOL's public profile might not hurt. At a meeting of
Netscape employees this week, led by Netscape CEO
James Barksdale, workers asked a wide range of
questions about benefits, stock options and the future of
products and services. The last question was about
"You've Got Mail," the forthcoming Tom Hanks-Meg
Ryan movie about characters who meet on AOL.
"The person wanted to know if we all were going to get
free passes to the movie," Netscape's Mr. Homer says. |
