Netscape Articulates Strategy–Analysts Say Execution is Key

Netscape Thursday elaborated on a new three-pronged business strategy, arguing that its electronic commerce applications, infrastructure software and NetCenter Internet portal give corporate America the tools it needs to create an Internet-based economy.

CEO Jim Barksdale and executive vice presidents Marc Andreessen and Mike
Homer explained to analysts and reporters how in Netscape’s view the three
seemingly disparate businesses are actually linked.

“I’m going to answer the one question that I get the most,” Barksdale said.
“You say you’re in the infrastructure business, in the e-commerce
applications business and in the Internet portal business. How can you do
it all well?”

Barksdale then went on to argue that Netscape is not a small company, has
cleaned up its financial problems, has quality partners and customers,
including CitiBank with which it recently did a multimillion dollar deal,
and has proven it can provide products the market wants.

Through NetCenter, he said, the company has demonstrated its ability to
build and manage one of the most heavily trafficked sites on the Internet.

Barksdale said Netscape’s vision is that large enterprises, which want to
remain competitive by using the Internet for sales and supply chain
management, will need to become the corporate equivalent of today’s ISP,
serving customers, business partners and suppliers and providing them with
a portal to the Internet. Netscape calls them Enterprise Service Providers,
or ESPs. To do that, he said, they will need the kind of scalable products
that Netscape provides in messaging, directory services, and management.

In some cases, the Netscape executives said, ISPs and portals like
NetCenter will have the opportunity to host business portals for large
customers and their partners, for trading groups and for smaller- and
medium-sized companies.

“If you aren’t in all three of these spaces–portal, infrastructure and
e-commerce–you can’t take part in the integration of e-commerce and the
portal business that we see coming,” Barksdale said.

Netscape’s executives said repeatedly that they believe other large portal
sites for consumers, Yahoo and AOL, do not have the experience in
developing infrastructure software or e-commerce applications that Netscape
has, and will not be in a position to provide business portals when the
time comes.

As part of its portal strategy, Netscape had previously announced enhanced
features to NetCenter, which it will roll out at the end of the month. It
is also more tightly integrating the browser technology with the NetCenter
features to give users more flexibility, content and features. The 4.0
version of the browser will be available later this year.

Homer, the executive vice president in charge of NetCenter, vowed that
NetCenter would be the leading Internet portal by the year 2000.

Netscape’s ambitions were met with some skepticism. “The consumer portal
strategy is great,” said Mary Meeker, an analyst at Morgan Stanley. “But
the world is not ready for the business portal yet.”

Other Wall Street analysts were also cautious.

“If they can get their installed base of browser users to download and
upgrade to the new browsers and add new users, then NetCenter can be an
interesting portal on the Internet,” said Jennifer Klein, an analyst with
Credit Suisse First Boston Corp. But she added: “I’m not sure they can
overtake Yahoo or AOL.”

Andreessen made it clear that Netscape is not trying to sell directly to
small and medium-sized companies. The sales force has a mandate to focus on
the top 2,500 accounts, he said. The reseller channel and ISPs will be used
to reach smaller customers.

Netscape also provided product demonstrations for the server-side products
that the company believes are crucial to its strategy of providing
customers with what executives call an end-to-end electronic commerce
solution: messaging, directory services, and network management services,
and various electronic commerce applications.

In response to a question after his formal presentation, Barksdale admitted
that while some big Netscape customers, companies like CitiBank and Home
Depot, are already creating the kind of Internet economy Netscape
envisions, it will be three to five years before it becomes a widespread

“Many technologists mistake a clear vision for a short distance,” he said.

Netscape’s stock rose slightly over $2, to $25 1/16, yesterday.

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