Netscape Bull's Pen
by by Rick Munarriz ([email protected])

Maybe this is it! Netscape's share of the Web browser market has been gradually giving way to Microsoft's <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> Internet Explorer over the past three years. Netscape has gone from total dominance to just 60% of the market, and with recent estimates slicing Netscape's lead even further maybe this is, indeed, it. As you read this, at this very moment, the baton of market leadership may very well be passing.

Enjoy the moment. Take a picture. I recommend a Polaroid snapshot because things develop awfully fast in the Internet age. Yesterday's giant may be today's little guy...

And tomorrow's giant once again. I can talk about the past, and how awful it is that Netscape shares were trading four times higher just three years ago, but why? Your history books probably show how innovators like Apple <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AAPL)") else Response.Write("(Nasdaq: AAPL)") end if %> and Novell <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NOVL)") else Response.Write("(Nasdaq: NOVL)") end if %> dealt with falling share prices as just about every player in the personal computer and networking sectors respectively soared.

So, I won't waste our time whining about how Netscape has been the Internet dud. It has. Past tense. Tomorrow is what ultimately prices a company, and given recent developments (Polaroid anyone?) I trust by the end of this Duel you, too, will come to appreciate the merits of this fallen darling's seemingly unnoticed rebirth.

While the browser wars make for interesting fodder, the reality is that the stock market is laying a price on eyeballs. Netscape owns the third most popular site on the Internet. Yahoo! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %> naturally is the leader with the $8.5 billion market cap (at $91 per share) to prove it. For the month of June, Yahoo! had 29.5 million visitors while Netscape drew 18.5 million net surfers. If being a destination was all that Netscape did, as is the case with portal companies like Yahoo! and Excite <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XCIT)") else Response.Write("(Nasdaq: XCIT)") end if %>, then one can argue that attracting 63% of Yahoo!'s take should be worth about $5.3 billion.

With Netscape trading at less than half that denomination, it is amazing to think that this is a company that also has other viable businesses -- like providing companies with intranet and extranet solutions, and, well, Netscape Communicator's suite of Internet software.

As, no doubt, shareholder petitions go around attempting to rename the company Netscrape, this is a company that may very well be more than just a niche option for diehard Apple users. In March, the company began to give away its source code, resulting in more than 250,000 downloads. Macintosh and Unix versions have been popular. However, guess which has been the most requested source code? Windows. Yes, Netscape is apparently doing Windows despite Microsoft's best attempts to ball and chain the browser to its operating system.

That is because, say what you will, there are a lot of people who think that Netscape's software is simply superior. Further, thanks to the watchful eye of the Justice Department, Netscape is in the enviable position where its competitor needs the company to stay alive to avoid a monopoly.

So, now we've gone over how popular Netscape is and how big brother Microsoft has to keep the P.O.W. in this browser war alive. Saving Public Netscape! Ultimately, I think the company will "earn it."

This is the part where we shake our heads at Netscape. It had paradise but never learned how to harvest. Thankfully, the company has finally buried complacency. Gone is the mentality that offering popular downloads would be enough to drive ad revenues. Content is king. Marketing is the pawn.

This marketing crash course was a humiliating collision at first. A few months ago Excite signed a $70 million dollar deal to join in the fruits of selling ad space on Netscape's portal. How much potential does Netscape have? In just the first twelve days on the job, Excite brought in $21 million in advertising sales.

Netscape may have been late to the game of adding content to create its portal and make it stand alone attractive, but that is changing quickly. Earlier this month America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> agreed to provide its Digital Cities content to Netscape's site. In just the past few months, merchants, software houses, and content providers have signed up to make Netscape the vibrant community it had the power to become all along. Ready to embark on a $10 million promotional campaign, it is enlisting entertainment juggernauts like Warner Brothers and Sony to help out.

Internet companies are certainly not being valued on next year's earnings, but it is interesting to note that expectations for Netscape are all over the map. From as low as $0.21 a share to as high as $0.75 a share, the only thing the analysts seem to agree on is that Netscape will be profitable. On the high end, the projection for $75 million in net income is twice as much as Yahoo! is expected to earn next year.

This may very well be the last of the Internet bargains. Soon Wall Street will realize that the eyeballs at Netscape are just as valuable as everywhere else. Once the company is coated in the same slick colors as the other high-flying portal stocks, it's going to be one great ride as it makes up for lost time.

Next: The Bear Argument