Netscape earnings take big hit

Stung by sluggish client and corporate software sales, the company posts a fourth-quarter loss much larger than expected.

Dawn Kawamoto Former Staff writer, CNET News
Dawn Kawamoto covered enterprise security and financial news relating to technology for CNET News.
Dawn Kawamoto
3 min read
Hit with sluggish sales at both ends of the software market, Netscape Communications (NSCP) said today it will post a fourth-quarter loss much larger than analysts' expectations, in part because of pricing changes on its standalone browser.

To offset the losses, the company announced the elimination of 300 jobs, the first workforce reduction in its history. The cuts represent 9.4 percent of the Netscape's total workforce of 3,200.

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. Excluding restructuring and acquisition charges of $79.3 million, the company would have posted a loss of $20.8 million, or 22 cents a share.

Analysts had revised their estimates downward this month after the company issued a preliminary warning. They had predicted a loss of 16 cents a share, according to First Call, as opposed to the 14-cent-per-share profit expected before the warning.

In addressing what happened to the financial outlook between its preliminary warning January 5 and its final earnings report today, Netscape chief financial officer Peter Currie said: "We announced a pricing change to the Netscape Communicator product, which has a bearing on the results."

Last week, Netscape announced that its standard-edition browser products would be free and that it would also give away its source code for its next-generation Communicator suite.

Netscape at a glance As a result of the price reduction in sales of its standalone Navigator, the company set its revenue level at $125 million--the low end of its preliminary warning, Currie said.

See special coverage: Netscape's sea change Revenues from Netscape's server software sales to corporations fell below expectations as competitors like Microsoft intensified the pressure on pricing, Currie said. That competition led to a decline in sales of Netscape's standalone browser, and revenues dropped as it rolled out plans for a free product.

In the last year, Netscape has been working to increase the share that server sales plays in its overall business and reduce that of its browser. Currie said enterprise revenues accounted for nearly 75 percent of Netscape's overall business in the quarter and was up 70 percent in year-over-year figures.

Standalone client revenue in the fourth quarter was $12 million of the company's total revenue base. That was down from last year's $52 million, Currie said.

"Client standalone revenue is down almost 80 percent year to year," he said. "In the fourth quarter a year ago it had been 45 percent of our revenues. It's only 10 percent currently."

Enterprise sales from client and server suites, subscriptions and services like consulting to corporate customers, rose to $92 million in the fourth quarter, up from $54 million a year ago down from the previous quarter's $96 million.

The company's Web site, meanwhile, generated $21 million in revenues in the quarter, up from $9 million a year ago but down from $27 million in the previous quarter.

Netscape's revenues, which have been climbing consistently, reached $125.3 million during the fourth quarter, up from $115.2 million for the same period last year.

Netscape's year-end revenues reached $533.9 million, up 54 percent over the 1996 levels. The company reported a loss of $115.5 million for the year, compared with profits of $24.4 million a year ago. Without the restructuring and acquisition costs, the company would have posted a profit of $4.7 million.