Netscape Communication did what almost everyone expected today by announcing free availability of its standard-edition browser products. More surprisingly, however, the company also will give away the source code of the next generation of its Communicator suite, a move that could affect the company's entire development structure.
The free-browser move has been expected for weeks, as company executives have broadly hinted that such a move was necessary to stay competitive with Microsoft, which gives away its Internet Explorer browser for free. Netscape has remained the dominant browser company, but Microsoft's market share has grown to roughly 40 percent since IE's release. Consequently, Netscape's revenue stream from its browser has steadily eroded, resulting in an expected loss for the fourth quarter of 1997 and about 400 layoffs.
By giving away the source code of Communicator 5.0, as the next-generation Internet software suite will be called, Netscape will match Microsoft's strategy to let developers use the underlying browser "engine" to power third-party applications. The source code will be available on the Web later this quarter as the first beta of Communicator 5.0.
In exchange for the free license, developers will agree to post their modifications of the source code on a developer community site Netscape plans to launch. Netscape will then fold the best third-party enhancements back into their own branded versions of the product, effectively using outside developers to evolve the product.
Executive vice president Mike Homer declined to elaborate when asked if this will result in a reduction of development staff.
Modified versions of the browser will not have Netscape logo. However, the company will encourage software developers to distribute their product on the Netcenter Web site, chief executive Jim Barksdale said.
The free-browser initiative, called "Unlimited Distribution," and the source-code giveaway will also drive more Web surfers to Netcenter, which gathers online commerce, software sales, headline news, and other services to attract advertising dollars.
This stream has become increasingly important to the company and should account for about 17 percent of its fourth-quarter revenue. Executives have calling Netscape both an enterprise software company and an online service company.
PC manufacturers, Net service providers, telecommunications companies, Web publishers, and software makers will now be able to redistribute the standard versions of Netscape Communicator and Navigator for free. (The Communicator Professional product, which adds software administration, terminal emulation, and a scheduler, will remain a for-fee product at $29.)
Starting January 23, Netscape will allow companies to enroll in the online distribution program through its Web site. Partners then will get access to a special download page for Netscape's new "distribution version."
"The Unlimited Distribution program is aimed at doing just that--making it easy for thousands of partners to freely distribute and millions of individuals to freely choose Netscape Navigator and Communicator," he added. "We have also just made it easier for our OEM [original equipment manufacturer] partners to include Netscape Navigator and Communicator on both servers and desktop computers, so their customers no longer have to settle for anything less than the market-leading browser."
The news comes the same day as word of a settlement between the Justice Department and Microsoft regarding Justice's contempt claim. Microsoft has agreed to immediately provide OEMs with the most up-to-date version of Windows 95 without the Internet Explorer Web browser.
Barksdale and other company executives hailed the settlement, calling it an added opportunity for Netscape to make deals with PC makers and other redistributors of software. They refused, however, to discuss any future deals.