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Tech Industry

Netscape to cut 300 jobs

The software company joins a growing number of high-tech firms that have resorted to layoffs in recent months.

Netscape Communications (NSCP) announced today that it would eliminate 300 jobs, the first layoffs in the company's history.

See special coverage: Netscape's sea change The Internet software company plans to complete the reductions, which represent 9.4 percent of its workforce, by the end of March. The staff cuts--in telemarketing, research, and other areas--come as the company posted a fourth-quarter loss today that was much larger than expected.

"We tried to avoid a general, across-the-board squeeze on expenses, because that won't allow us to tune the business in ways that it needs to be tuned," said Peter Currie, Netscape's chief financial officer.

To be sure, the number of layoffs is relatively small in comparison to the company's 3,200-person payroll. At Netscape's campus headquarters in Mountain View, California, the mood was still bullish among some of the Netscape rank and file interviewed before today's announcements. (See related story)

However, the reductions show just how quickly fortunes can rise and fall in the volatile high-technology sector. Only a few years ago, Netscape embodied the high-flying Silicon Valley start-up phenomenon and quickly became the darling of Wall Street.

Jim Barksdale, chief executive and president, said the cutbacks and other changes have set the stage for profitability this year. But analysts have begun to question Netscape's long-term strategy.

"It's not a solvency issue; it's a revenue growth issue. You can only cut so much," said Michael Stanek, an analyst with Lehman Brothers. "At this point, the question is how long does this take to turn around. I wouldn't even dare put a date on it."

Netscape posted a net loss of $88.3 million, or 92 cents a share, for the quarter ending December 31, compared with profits of $8.2 million or 9 cents a share last year. The figures came in below Wall Street expectations, which had already been lowered earlier this month after a preliminary warning from the company. Analysts had predicted a loss of 16 cents a share, far lower than the 14-cent profit expected before the warning.

In reducing its staff, Netscape joins a growing number of high-tech companies that have resorted to layoffs to offset losses in recent months.

Storage maker Seagate, for example, took 10,000 off its payroll, and high-end workstation maker Silicon Graphics laid off 1,000 workers.

Reductions are being made in telemarketing, which will be handed over to contractors; regions will be consolidated to lower overhead expenses; and support services are being centralized. Technology outside Netscape's core business and overlapping research and development will be trimmed as well.

However, areas that are still hiring include direct sales, tech support, and consulting, according to Currie. Investments will still be made in remote management, quality control, and administration of Netscape's software.