Netscape

1.

(1) Why are investors excited about Netscape?

For one thing, Netscape was booming in innovating products and had set standard for industry, implicating high potential performance in the future. For another thing, people had faith in high-tech stock, so investors hoped to get a significant return on Netscape

(2) What is Netscape’s business model?

Netscape used “give away today and make money tomorrow” as their strategy.

Netscape provided free browser to capture web browser market and end-user, set standard for the whole market and generated revenue by selling software and server which are developed based on their main product of Navigator.

(3) What must Netscape accomplish if it is going to be successful in the long run?

Netscape must set a new industry standard and generate revenue. They ought to incorporate both browser and server function to make sure their application can set new industry standard and therefore maintain high market share. In turn, those innovation and investment can offer Netscape capacity to defeat competitors including America Online and even Microsoft. If they were able to accomplish aforementioned two steps, Netscape can probably maintain healthy cash flow and potential high growth rate to be successful in the long run.

(4) What are the risks Netscape faces?

a. Financial Risk. Netscape suffered Net Loss of 4.3 million during the first 6 months of 1995. Netscape was going to face net loss in the foreseeable future as well. Also, from the financial statement we can find that Netscape spent great amount of money raised by paid-in capital to support their Research and Development, Sale and Marketing expense. Although such expense can turn into prospective growth opportunity in the future, Netscape might not survive with negative operating cash flow.

b. Operating Risk: multiple competitors in browser as Spyglass, in Server as Microsoft and in Online Service as America Online and Prodigy would jeopardize Netscape market share....