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Technology Stocks : Netscape -- Giant Killer or Flash in the Pan? -- Ignore unavailable to you. Want to Upgrade?

To: Gary Jacob who wrote (2370)	2/6/1998 11:22:00 PM
From: Mark Zavist	Read Replies (1) \| Respond to of 4903

Netscape and the importance of friends By Michael Moeller, PC Week Online 02.06.98 5:59 pm ET Netscape for sale? Is all or part of Netscape Communications Corp. for sale? That's the $64,000 question. If there is any truth to the widely reported speculation, only the likes of Jim Barksdale, Larry Ellison, Steve Case or Scott McNealy really know. And whether those corporate heavyweights decide to buy is anyone's guess. But one thing is certain - none of them wants Netscape to fail. At issue is not Netscape's products or the incredible number of visitors to its Web site each day. Instead, it is a question about public perception. Netscape is the poster child for what might be called the "anyone but Microsoft" movement - also known as "Gang of Four," represented by Netscape, IBM, Oracle Corp. and Sun Microsystems Inc. If Netscape flounders, so the reasoning goes, convincing IS managers that a viable alternative to Microsoft Corp. will ever succeed would suffer a major credibility blow. "The world needs Netscape, and you can be sure that they [Netscape] are not going to go anywhere," said Evan Quinn, an analyst at International Data Corp., in Framingham, Mass. "Its partners will make sure of that." Observers who predict the end of Netscape as a single entity may be premature. Listening to the company's executives talk about the future, it's clear that they believe a string of new servers and applications will prove the doubting Thomases wrong. And they may be right. But the current financial picture at Netscape is a sticky one. Its valuation and market capitalization are about equal, making it ripe for a takeover. Fueling the fires are questions about the next couple of quarters, which could be a struggle for the company financially as customers continue to sit on the fence, waiting for the next generation of server software (code-named Apollo) to arrive early this summer. In fact, some analysts say that recent rumors are a ploy to bump up the stock and prevent a takeover. Theories and ideas about the future of Netscape aside, observers say one thing is a near certainty: If the picture becomes too bleak, look for IBM, Oracle and Sun to switch from partners to saviors and expect them to do so as a group. "The Gang of Four will likely become Netscape's guardian angels," said Don DePalma, a principal analyst and Netscape watcher at Forrester Research Inc., in Cambridge, Mass. "If Netscape can't get its house in order, you can bet that they won't let Netscape die." Even Netscape insiders say that if the Mountain View, Calif., company were to take any outside money, it wouldn't be from just one or two partners. "The danger in that is if one company makes an investment, what impact [does that have]on the other two," said one Netscape official who, while not confirming anything, indicated that an equity stake by the other members of the Gang of Four might not be totally out of the question. There are also compelling technical reasons why IBM, Oracle and Sun need Netscape. While each has individual interests, collectively Netscape is the best choice for getting Java out to the corporate desktop. Equally important is Netscape's support for Common Object Request Broker Architecture, the underlying object model that is the direct competitor to Microsoft's Component Object Model. Finally, even though Netscape is now giving away its client software, the millions of desktops that currently run the browser represent one of the most substantial threats to Microsoft's home turf in a long time. And an alternative client opens the door for sales of server software by its partners. But it is the collective might that is most important to the four companies. None has succeeded in unseating Microsoft by itself. The combination of IBM's customers, Oracle's success in storing data, Sun's Java technology and Netscape's popularity poses a substantial challenge to Microsoft. Like an engine, if one of the cylinders fails, the car may run, just not as well.