Netscape’s Initial Public Offering
Netscape’s Initial Public Offering
Q1. Why has Netscape been successful to date? What is its strategy? How risky is its current competitive situation?
Netscape's most successful product was the leading client software program that allowed individual PC users to exchange information and conduct business over the internet, being the most user-friendly version of similar products.
Mid 1995, out of the 57million internet users, 8million were new that year. Internet was growing rapidly. Netscape set the industry standard with Netscape Navigator and managed to capture 75% of the market by Spring 1995 and was poised to make money by selling software to companies willing to make use of online marketing opportunities.
However, this success carried some risks with it, too, according to us. Netscape Navigator, the company's most successful product, accounted for 65% of total revenues in Q2 2005. Server and integrated application software accounted for 28% of revenues in that quarter. Notwithstanding any other factors, deriving such a large share of your revenues from one product always carries a long-term risk with it.
Given that Spyglass Inc was Netscape's only real competitor in 1995 (and even competing on a different market), it is beyond doubt that Netscape's short term position in the market was excellent. However, with big giants such as Microsoft, America Online, and Progidy developing similar software and planning to enter the same market Netscape was engaging in on a 1 or 2 year term from 1995, one should have concluded that it was not very likely that Netscape would remain in its unique monopoly (or close to monopoly) position. It can be inferred from Exhibit 3 of the article that Microsoft and America Online had a far greater spending power than Netscape in 1995, adding to their chances of taking up market share in the near future.
Q1. Why has Netscape been successful to date? What is its strategy? How risky is its current competitive situation?
Netscape's most successful product was the leading client software program that allowed individual PC users to exchange information and conduct business over the internet, being the most user-friendly version of similar products.
Mid 1995, out of the 57million internet users, 8million were new that year. Internet was growing rapidly. Netscape set the industry standard with Netscape Navigator and managed to capture 75% of the market by Spring 1995 and was poised to make money by selling software to companies willing to make use of online marketing opportunities.
However, this success carried some risks with it, too, according to us. Netscape Navigator, the company's most successful product, accounted for 65% of total revenues in Q2 2005. Server and integrated application software accounted for 28% of revenues in that quarter. Notwithstanding any other factors, deriving such a large share of your revenues from one product always carries a long-term risk with it.
Given that Spyglass Inc was Netscape's only real competitor in 1995 (and even competing on a different market), it is beyond doubt that Netscape's short term position in the market was excellent. However, with big giants such as Microsoft, America Online, and Progidy developing similar software and planning to enter the same market Netscape was engaging in on a 1 or 2 year term from 1995, one should have concluded that it was not very likely that Netscape would remain in its unique monopoly (or close to monopoly) position. It can be inferred from Exhibit 3 of the article that Microsoft and America Online had a far greater spending power than Netscape in 1995, adding to their chances of taking up market share in the near future.