Netscape Bear's Rebuttal
by Yi-Hsin Chang ([email protected])
Ahhhhh, so Rick wants us to forget all about the past, let bygones be bygones. He says it's a "waste of time" to talk about the past. I guess in Rick's strange and surreal world we would always look into the future and use a company's or analysts' projections without regard to the company's past performance. Polish your crystal ball and get ready to call the Psychic Friends Network!
The reason we who believe in remembering the past patiently pore through 10-Ks and eagerly await quarterly earnings reports is because we're looking for concrete data about a company's performance. Any company can outline grand schemes for growth and expansion. What Foolish investors want to see is the company's track record. Of course, past performance is no guarantee of future performance, but a company that has consistently delivered solid revenue and earnings growth certainly is more credible than one that has disappointed investors.
Netscape, of course, would like for us to forget about its past, especially last year, when even excluding one-time charges the company earned a mere $4.7 million, or $0.05 per share, down from $24.4 million, or $0.27 a share, in 1996. Realigning its fiscal year to November through October from the regular calendar year might better reflect the seasonal buying patterns of Netscape's enterprise software customers, but it has made it impossible for investors to make year-on-year comparisons. For instance, in late May Netscape reported results for the three months ended April 30 (its new second quarter). Instead of providing comparison numbers for the same three months in 1997, the company gave figures for the three months ended Dec. 31 (formerly its fourth quarter). It's still unclear what exactly happened to poor January, which was left out in the cold.
Both Rick and Netscape would like us to forget that the company has been, in Rick's own words, "the Internet dud." As for Netscape's "unnoticed rebirth," the thing is, not much has changed. Plus, when you take shareholders for a ride and fail to deliver, you have to do much, much more to prove yourself and win investors' trust again.
Rick is putting a lot of faith in the number of eyeballs Netscape commands. As I mentioned in my original argument, Netscape's traffic numbers have to be taken with a heavy dash of salt. Most visitors are there by default because they haven't bothered resetting the home page on their Navigator browser. That's why you can't directly compare Netscape's page view numbers with those of Yahoo! or Excite. They're simply not "just as valuable as everywhere else."
As for Navigator being a superior product to Internet Explorer, many objective tests by the likes of PC Magazine and PC Week have shown that Explorer is better. But it doesn't take a trained "expert" to arrive at the same conclusion. You can try this at home. Open a screen with each of the two browsers and compare. A few obvious differences: 1) It's much easier to organize Favorites on Explorer than Bookmarks on Navigator; 2) Explorer keeps track of which sites you've visited, so you can easily go back by looking in your "History" or just typing in the first few letters of the address -- Explorer can fill in the rest; 3) Explorer stores Web pages you view in a special folder for quick viewing later; 4) A nifty "Mail" button allows you to send a link or an entire page to a friend.
What I found interesting was Rick's assertion that Microsoft needs Netscape "to stay alive to avoid a monopoly." Microsoft doesn't need Netscape for anything. Of late, it's been doing just fine fending off the antitrust hounds in court. Anyway, Netscape isn't likely to disappear. There are enough anti-Microsofters/anti-Bill Gatesers out there to keep Navigator and Netscape alive. As for Rick calling Netscape a "P.O.W. in this browser war," all I can say is if you'd invest in a P.O.W., I've got a bridge to sell you.
Rick also pointed out that analysts' earnings projections for Netscape are "all over the map." This reflects the uncertainty of Netscape's future and its high risk as an investment. And it's certainly no bargain if the company can't deliver on earnings. Ultimately, anyone buying Netscape is doing so on a leap of faith. I, for one, will wait for more signs that the company can succeed amid the competitive pricing pressures of the enterprise software business and the go-go, cutthroat nature of the Internet portal business.
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