That's right, the enterprise software maker, run by computer scientists, engineers, and Ph.D.s (as in chairman "Dr." Jim Clark).
Sound ridiculous? Consider this: Netscape's market value stands at a mere $2.4 billion--less than half that of Yahoo ($5.3 billion), and nearly one-eighth that of AOL ($18.8 billion).
Yet Netscape's Web site, dubbed Netcenter, is one of the most visited domain names on the Web. According to Media Metrix, Netscape ranked third among all Web sites behind Yahoo and AOL, in terms of percent reach from home. It ranked ahead of Microsoft as well as Infoseek, the Internet directory that struck an alliance with Disney yesterday.
Measured by percent reach from work--potentially more profitable demographics--Netscape ranked second behind Yahoo and ahead of AOL.
This back-of-the-envelope analysis isn't meant to put Netscape "in play." Instead, it is meant to show that companies that still face serious financial and strategic problems can be repositioned 180 degrees, thanks to the "portal madness" that is sweeping the Internet industry--and perhaps benefit. After all, Wall Street always likes a "story" to go along with a stock.
Here's the reality check, however: One reason that PC users wind up at Netscape's Web site is that it is the default site for its browser users. The company remains the dominant browser provider despite Microsoft's inroads. And as a recent New York Times/CBS poll pointed out, many PC users aren't that pro-active when it comes to customizing their computers.
In addition, Netscape faces myriad challenges: it is barely profitable (and still posting steep operating losses), it faces cutthroat competition from Microsoft and others in the enterprise software market, and its Web site--while growing--still accounts for the minority of total sales. The erosion of browser market share to Netscape poses another hurdle in expanding Web site traffic.
Despite these obstacles, Netscape continues to benefit from the Street's recent bullishness on "portal plays." The company's stock rose more than 10 percent yesterday alone to close at 27.9375--continuing a rebound from record low territory.
The brokerage firm Dain Rauscher Wessel yesterday raised Netscape to "buy-aggressive" from neutral. Most of the reason for the firm's bullishness focused on Netcenter. "We estimate that Netcenter will generate $125 million in revenues for fiscal 1998 and $198 million in fiscal 1999," Dain said.
Other analysts have "buy" recommendations on the stock for similar reasons, although they caution about risks in the enterprise software market.
Whether the runup in Netscape's stock will last remains to be seen. But it's a ride worth watching--if only to learn a lesson.
Netscape is optimistic about Netcenter. Users visits the Web site because they like the cool features, not because it's a default site, executives argue. The company has been adding features such as email and chat, and revenue growth is robust. "Netcenter revenues for the three months ended April 30, 1998 and March 31, 1997 were $31.1 million and $19.6 million, or 24.5% and 16.3% of total revenues, respectively," the company said in a recent regulatory filing.