aOL Initiated Merger Making Internet Titan
Date: 12/24/98
Author: Pete Barlas
Netscape Communications Corp. agreed late last month to be
bought by America Online Inc. The merger will create an
industry titan, but less certain is the future of Netscape Chief
Executive Jim Barksdale.
Barksdale is credited with molding Netscape and its largely
young tech work force into a major Internet power with its
Web browsing and business software. He joined in January '95
after leaving his post as CEO of McCaw Cellular, AT&T Corp.'s
wireless services division.
Netscape may mark the last time Barksdale will hold the reins
as a company CEO. He recently spoke with Investor's Business
Daily about the merger and his future.
IBD:
In June, Netscape hosted analysts at a summit to promote its
software as a major tool for businesses. Was the company
already looking for a buyer/partner then?
Barksdale:
No. We didn't make a move to find a buyer or a partner at any
time, regardless of what some people have written. AOL came
to us in September. They were the ones who came up with the
idea. We didn't go try to find anybody.
IBD:
When AOL came to you, what made you want to talk? Was it the
$4.2 billion offer, the synergies between the two companies or
something else?
Barksdale:
I think it was both. They were willing to offer a price that in
our board's mind was a way of bringing forward the value of
the products. On a long-term basis, it offered great
opportunities for technology development.
IBD:
How did you feel while the talks were going on? Did you have
any reservations?
Barksdale:
Well, sure. But I saw a greater opportunity for capturing a
bigger space using Netscape technologies within the AOL
family than outside of it. And that's the way we look at it today.
Our technologies and our products will remain as a subsidiary
of AOL and we will be managed and run as though we were a
stand-alone company.
IBD:
Netscape is viewed as a ''technology'' company and AOL as a
''consumer'' company. How do you see Netscape fitting in with
AOL?
Barksdale:
In the long run, all business interests are associated with
selling something, and AOL is the greatest connection
machine on the planet right now. It enables us to engage in
effective electronic commerce deployment at a faster rate.
That's what everybody is trying to do.
IBD:
Is Netscape taking steps to keep its employees from leaving?
Barksdale:
Of course. We are not brain dead on this subject. We have been
hiring leading technologists for a long time, much longer than
most of the analysts who write about it. We have offered some
incentives . . . one month's salary for people to stay through
closing. And we will be working on retention programs that
will give employees great incentives to stay.
IBD:
Does this merger challenge Microsoft Corp.?
Barksdale:
We don't think that it was done for that purpose. It's our
intention to build a great company that will be competitive
with other companies, but it was not in any way targeted
toward Microsoft. In many cases, we work with Microsoft and
use their products. In some ways, (the merger) will benefit
Microsoft. We are on top of Microsoft's operating systems, and
the more successful we are, the more products they will sell.
IBD:
Does the merger give Microsoft CEO Bill Gates more fuel in his
contention that Netscape's value hasn't been diminished at all
by Microsoft?
Barksdale:
Of course not.
IBD:
Why?
Barksdale:
I don't want to get into that. This (Microsoft) trial is still in the
courthouse and I've noticed everything we say, Microsoft has a
good way of turning and writing articles about it. . . . I would
just rather not talk about it. It's obvious to anybody that the
trial is about activities of Microsoft in the past and the
indications of what they will do in the future. Let them try the
case on its merits, which are about events and things that have
taken place in the past where (Microsoft has) used
monopolistic practices to stifle a competitor as clearly as the
nose on your face. Any announcement about anything we are
doing is irrelevant to the case.
IBD:
What will be the long- term effect of the merger on the
Internet industry?
Barksdale:
It will make it easier for people to find and buy things over the
Internet. It will increase opportunities for companies that are
trying to create and keep customers in the Net economy.
IBD:
There's a big need for experienced executives to lead Internet
start-ups. Are you interested?
Barksdale:
No. I have been there, done that. I have done that now for 30
years. I don't think I want to do that again. I'm going to be
involved in technology as a private investor and a board
member.
IBD:
What do you think are the strongest points of the Internet
now? What interests you?
Barksdale:
The most important thing I look for is not so much the
technology edge, but the business plan and the management
team. (And) whether (the company is) doing something unique
in cyberspace that you can't do in real space, such as having
unlimited floor space or shelf space like Amazon.com does or
a unique value proposition such as what Dell does over the
Internet.
IBD:
Is there any type of business on the Net that doesn't work?
Barksdale:
Almost invariably, when you say something won't work, it
turns out to be the next Yahoo.
IBD:
What components of the Internet need improving?
Barksdale:
Security, privacy, payment mechanisms, speed. Those are
probably the biggest.
IBD:
What do you see happening with the Internet in the coming
year?
Barksdale:
I think you will see a lot more custom portals similar to
Netscape's Netcenter. I see a lot more businesses outsourcing
Internet technologies. You will see more and more appliances
geared toward Internet traffic, everything from hand-held
devices to New Age telephones. You will see a major debate
about carriers' use of cable systems to deliver Internet services
to the home. On a regulatory front, the perennial debates
about encryption and security and privacy will continue. And
you will see a better definition of taxation policies of the
Internet.
IBD:
What will be your role at AOL?
Barksdale:
I will be on the board of directors, and I will play an active role
in helping Mr. (Steve) Case and Mr. (Bob) Pittman, their
executive team, the Netscape people and customers to make
the transition as smooth as possible.
IBD:
After the merger will you stay in Silicon Valley or move back to
Mississippi?
Barksdale:
I will stay here. I will have a home there, but I don't know if
that will be my primary residence or not. I will certainly spend
a great deal of time in California.
(C) Copyright 1998 Investors Business Daily, Inc |
