Netscape vs. Microsoft
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Entrepreneur Jim Clark made $10 million from his start-up Silicon Graphics. After experiencing internal problems, he found himself forced out of his own company. It was time for something else.
Knowing he wanted to develop some type of “internet” product, Netscape was born. In 1994 he hired his first employee; Marc Andreessen, from the University of Illinois. Marc and some other students built a product called Mosaic. This web browser precursor made the internet more easily accessible to the public. Which at the time, wasn’t.
Andreessen had the idea of designing a product even more powerful than Mosaic. To recruit his team he went to University of Illinois’s National Center for Supercomputer Applications. After promises of riches, fast cars and women….he recruited the programmers he needed.
Netscape’s first customer for their “super-browser” product was MCI. MCI paid $7.2 million and the media portrayed Netscape as the cutting edge of technology.
To help with day-to-day management, Jim Clark hired Jim Barksdale, a former executive with FedEx and McCaw Cellular. Barksdale gave the company a more professional look; like wearing a suit for instance.
The company went public in about a year. The stock was priced at $28 on before its first trading day. It opened at $71. The price hit a high of $74.75 and closed at $58.25. Jim Clark’s stake in the company was now worth $663 million. At Netscape’s peak, he was worth $1.4 billion.
The IPO made millionaires out of the programmers and BMW’s and Porsches filled the parking lot. A dark cloud was rising however; and its name was Microsoft.
When Clark first launched his company he hoped he wouldn’t catch the eye of Microsoft. Microsoft was known for squeezing its competitors…..hard. In September 1994, Microsoft offered Netscape $1 million to license its software.
Jim Clark replied in a a profanity laden rejection. It basically said "no" uncertain words; he let them know he was not interested in doing business because of Microsoft’s reputation. Namely, driving software companies out of business after they did deals.
By the beginning of 1995, Navigator was used by 60% of the browser market. The reason for this was you can get it for free over the internet. How’d they make money? The company also produced a line of server based products and charged businesses to ue Navigator. Corporate customers paid for support services enabling the firm to rake in $80 million in its first year of business.
Clark branched out into other sophisticated software products and by the end of 1995 was worth $7 billion.
For most of 1995, Microsoft had focused its attention on Windows 95. A web browser was not part of Window’s original plan. Until December of that year when Bill Gates noticed the internet. He announced that he was “hard core” about embracing the internet throughout all of Microsoft’s products. Like a photon torpedo launched straight at Netscape…..he said Internet Explorer would be free to everyone; including commercial users.
After the announcement, Netscape’s stock dropped 28%. The market share for Navigator began its steady decline; although the company had a strong market share of web servers used by U.S. corporations.
During this time, Jim Clark was involved in an intellectual property dispute with the University of Illinois. The legal battle took its toll on Clark and he decided to accept Microsoft’s offer of purchasing his license. Microsoft said no, reminding him of his off-color rejection several months earlier.
Clark asked Microsoft for an API (application programming interface). This code would allow Navigator to work with Windows 95. Microsoft took its time in responding; months in fact. Microsoft said they would give the API in exchange for a seat on Netscape’s company board and a stake in the firm. Clark refused and Microsoft backed down. It gave Clark the information he needed.
This prompted Clark to complain to the U.S. Department of Justice regarding anti-competitive tactics by Microsoft. Barksdale even testified at the federal government’s anti-trust case against Microsoft.
Microsoft built its own Internet Explorer and “persuaded” PC companies such as Compaq to use Explorer instead of Navigator. Because Microsoft is the dominant operating system of computers everywhere……it was almost impossible for a competitor to get a piece of the desktop.
Netscape couldn’t compete. It moved out of the web browser business. In November 1998 the company was sold to America Online. Looking back at the first battle of the internet, there were certain lessons to be learned.
Things that Netscape did well were being the first company to take advantage of the internet. Its obvious looking back now; but ingenious to have the foresight back then.
By giving the browser away for free, they established a huge distribution channel. If you were comfortable using the software at home…you might as well use it at work. But that’s when the price tag entered the picture; and the service fees.
At the time Microsoft had a commitment to propriety software architecture. When customers needed an upgrade….it had to be the latest version of Windows or forget it.
Netscape decided to turn this into their advantage. Navigator supported all open standards: UNIX, Apple, and even Microsoft’s older products such as Windows 3.1. Cross platform support allowed them to reach customers Microsoft shunned.
Netscape as adept at making sure the press acted as an extension of its marketing department.
Some failures included Netscape’s ineffectiveness at building corporate relationships. Software does not live in the world of technology alone. Netscape did many things on its own and felt confident enough to do so. Lack of alliances with computer and software companies did commercial damage.
At the time of the battle….the odds were really stacked against Netscape. They only had 700 employees. Microsoft, 17,000 employees and almost $6 billion in sales during 1995. .
By the end of 1997, Netscape posted a fourth-quarter loss of $88 million and its browser market share dropped to 50% by 1998. Microsoft attacked on all fronts like only Microsoft can.
On March 1st 2008 America Online dropped product support for Navigator. But if you can’t get enough of that big letter N logo from the 90’s…….AOL will let you turn it into a home page.
Thanks for the memories.
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