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Netscape scrapes by in 2Q
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May 26, 1998: 8:34 p.m. ET
Officials satisfied with progress in transformation to media company
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NEW YORK (CNNfn) - Netscape Communications Corp. is finding the transition from a traditional software company to an enterprise software and media concern to be pretty costly.
The Internet software and content company posted a profit of only $8,000 -- or less than a penny a share -- in its second quarter, down sharply from the year ago period when Netscape earned $7.3 million, or 8 cents a diluted share.
Revenues rose 5.6 percent to $127.2 million as the company continued to battle Microsoft Corp. for control of the browser market.
Looking to expand beyond browsers
Forced by Microsoft to start giving away its popular Navigator browser for free, Netscape has been trying to shift its focus to enterprise software and other outlets, such as turning its Netcenter Web page into a major Internet portal and a rival to Yahoo!
However, the transition has been difficult.
In the latest quarter, Netscape's results were bolstered by a one-time gain of $8.3 million from the sale of securities. Without the gain, Netscape would have lost about 8 cents a share in the quarter, slightly better than Wall Street's estimates.
In April, Netscape filed to sell 200,000 shares of cable Internet provider @Home Corp. for around $6.2 million. The stock sold amounts to 50 percent of its stake.
According to First Call, analysts had expected Netscape to report a loss of about 10 cents a share in the quarter but it was not clear if the estimate included the gain from the securities sale.
Adding to the confusion, Netscape changed from a calendar year ending in December to a fiscal year ending in October, choosing to take previously-announced restructuring charges in a one-month transition period that ended in January.
During the so-called stub month Netscape reported an operating loss of $54.9 million, reflecting a $12 million restructuring charge.
Netcenter revenues softened browser war
While Netscape's decision to give away its browser cost the company about $13 million in the quarter, Netscape buffered the impact of the loss by growing its Netcenter Web site revenue to $31 million.
Netscape also recorded software sales of $77 million and $30 million in recurring and one-time revenues for Web site advertising and sponsorships.
In April, search engine company Excite Inc. agreed to pay Netscape $70 million as part of a two-deal deal to offer co-branded services on Netscape's Netcenter Web site. However, officials said none of that revenue was recorded in the second quarter.
The company said its shift to an enterprise software concern is working since 58 percent of enterprise software orders were worth more than $1 million and 64 percent of Netcenter revenue were in transactions of more than $1 million.
"We are pleased with the quarter. It was solid quarter coming out of a major product transition and making the [browser] free. Both enterprise software and services showed steady growth. We feel we're well positioned going forward," said Peter Currie, Netscape's chief administrative officer.
Despite the negatives, Netscape President and Chief Executive Officer Jim Barksdale said the earnings show Netscape's decision to take advantage of the heavy traffic of its Netcenter Web site is paying off.
"Our decisions to broaden our enterprise solutions business through acquisitions and to invest in our Internet portal site are now bearing fruit, with both parts of the business showing steady growth," Barksdale said.
Netscape (NSCP) shares ended down 1 to 23-7/8, but rebounded to 24-1/4 in after-hours trading.
--by staff writer Cyrus Afzali
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