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Netscape shifts sales strategy

The company reorganizes its sales force, putting more responsibility on third-party partners and keeping the richest customers for itself.

Netscape Communications (NSCP) has reorganized its sales force to put more responsibility on the shoulders of third-party partners and keep only the richest customers for itself.

In a letter sent late last week to resellers of Netscape products, executive vice president Mike Homer detailed the company's new sales organization, which went into effect this quarter. Netscape representatives will no longer sell products to businesses with less than $750 million in annual revenue; that responsibility will fall to the company's 1,200 "Solution Expert" partners. Solution Experts are companies that are familiar with Netscape software, sell it to customers, and advise those customers how to use it.

"Our direct account managers will be compensated only when they sell into a list of named, large enterprises with greater than $750 million in annual revenue," Homer wrote in the letter.

Company executives refused to say how many of the 300 recent layoffs came from the sales team. The layoffs, the first in the company's history, came amid news of a $88 million loss for the fourth quarter of 1997. The misfortunes are due in part to rival Microsoft's success in giving away its Internet Explorer browser for free, prompting Netscape to match the move.

Now that Netscape no longer charges for its browser software, its intranet and e-commerce products are the cornerstone of its business model. The reorganization will focus Netscape's in-house resources on potential clients with the most money that need the most hands-on help to build their networks.

"It's obviously important that they capture the high-end enterprise market. In a sense, that's all they have left," said David Dabbs, director of software development at Neoglyphics, one of Netscape's Solution Expert partners. "This lets them focus on the customers who have the largest chunk of money to spend."

To sell to those cream-of-the-crop customers, Netscape will enlist the help of its top 100 Solution Expert partners, Homer wrote. If a company with less than $750 million in annual revenue wants Netscape products, it will have to go through a third party. That structure seems to ensure more business for channel partners.

"Theoretically, it means more business for VARs [value-added resellers], but you hear this rhetoric from a lot of businesses. It depends on what pans out in the market," said William Sears, vice president of technology and new business development at Digital Boardwalk, a reseller of Netscape's e-commerce software.

Netscape is limited by the quality of service its partners can provide, Sears said.

"You won't see Netscape tossing deals willy-nilly to its unproven partners," Sears said. "The partners have to be up to the task."

In previous quarters, the company has derived about half its revenues from direct sales, as opposed to indirect sales through a channel partner, but company representatives refused to project how the new "rules of engagement," as Homer called them, will affect that split. The company also did not say how many of its current customers have more than $750 million in annual revenue.

Netscape used to measure the cut-off point in terms of "seats," or number of employees actually using the software within a given company. The previous cut-off was 2,000 seats. The company decided to evaluate customers by annual revenue because "those numbers are easier to track and measure," said a company spokeswoman.

Heading up the new channel strategy is vice president of channel sales Ian Locke, promoted from Netscape's Canadian sales organization. He will report directly to North American general manager Fred Giordano.