EUROPEAN VIEW
I have a theory that says it isn't Microsoft that has plunged Netscape into serious difficulties, but dealers, Vars and distributors. Or rather, Netscape's non-use of the distribution channel. This is only one of the bad moves that Netscape has made in the past few years. In the light of its quarterly loss of $88 million and stagnating sales figures, several decisions have been made which seem bizarre, although the $88 million was not altogether an operational loss because included in this was the takeover of Actra Business Systems and Kiva Software.
But the underlying trends continue - loss of market share, decline in the confidence of investors, sales lull, competition and the refusal to allow the channel to play a part. And there are several examples of that.
Take Netscape CEO Jim Barksdale's decision that Netscape plans to sell more via its own Website. Well here's a word of advice: 'It won't help.' The turnover from the Website fell in the fourth quarter to $21 million.
Another example is Netscape's decision to support nothing but specialised Vars and unleash its sales team on customers. The Solution Expert partners are permitted to do business with companies which have a turnover of under $750 million, the rest falls within Netscape's competence. But why? Netscape is flying in the face of every grain of logic when you remember that in the preceding quarters, about 60 per cent of turnover was achieved via Vars. Instead of pushing for a substantial increase in the number of Vars, Netscape plans to do just the opposite and trim its numbers.
The channel strategy isn't used to its full advantage and neither is product strategy. Companies in the computer industry need new innovatory products. Netscape has decided to discontinue several product developments. That won't please Netscape co-founder Marc Andreesen, but what do you expect, he can hardly go and work for IBM, Sun or Microsoft.
The internet firm intends to concentrate on e-business applications and intranets. It will never be able to supply all the added value the business community needs. But Microsoft will, because thousands of Vars will be happy to do that for it. Pricing pressure on those products will increase. Barksdale is already blaming part of the loss on 'competitive pricing pressure'. How will Netscape react if it finds out that its products have also become commodity products? Give them away?
We haven't heard the last about the dumping of source code. There are believers and non-believers. Some people hold that all the creative talents in the world will ensure Navigator becomes a gem of a product. But others take the view that it's the most foolish decision ever. Microsoft is already unravelling every record of source code and turning it to its advantage.
And how much longer will Navigator be seen as an industry standard? Another key component in Netscape's business plan is its services. But services are labour-intensive and a company needs volume if it is to make good a success story. By itself, Netscape won't be able to build the industrial critical mass. For that it needs heaps of partners.
Netscape has to make the right choices - and fast. Like someone once said about distribution: 'Get niche, get big or get out'. Either it says it will become a niche player or it must gain the support of the channel.
The third option is that it is taken over by someone else after a few price corrections of the share.
Can Netscape still turn things round? Regardless of the fact that it may be a case of too little too late, we'd like to believe so. Like Apple, Netscape is a free spirit. It's almost like a David who made a stand against Goliath and was consequently admired by customers, dealers and distributors.
When the channel puts its shoulders to the wheel, things begin to move.
Don't forget it was partly due to the channel that Microsoft, Hewlett Packard and Compaq expanded to their present size. Provided the Netscape management is prepared to fix that in their minds, the game isn't over yet.
Jan Pote is editor of PC Dealer, Belgium.