Related Web Works

[Image] Business report: Waiting on the Fed | Marketwatch: Markets close mixed

Tuesday, August 20, 1996

Browser war heats up with release of Navigator 3.0

With a little help from its friends, Netscape could hold its own against Microsoft

by Michael Brush

Hoping to stave off an aggressive attempt by the gigantic Microsoft Corp. to beat it at its own game, Netscape Communications Corporation Monday counterattacked by releasing version 3.0 of its Netscape Navigator.

The move is a response to Microsoft's launch last week of an improved version of its Internet Explorer browser -- a product meant to make big inroads into Netscape's estimated 80% share of the browser market.

Given the difference in size between the two companies, and the fact that Microsoft usually gets what Microsoft wants, you might think that Microsoft's eventual dominance of the browser market is inevitable.

Think again. Their battle could easily turn out to be a computer-age version of the biblical David and Goliath story. Insiders say Netscape could well manage to hold its own ... with a little help from its friends.

Investment analysts who follow both companies and the sector say it's still too early to know which of the firms will eventually win the battle of the browser.

"Who the hell knows?" says Stephen Cohen, the director of technology research for First Albany Corp. "Microsoft was a little late in coming to the market, but it is coming on like gangbusters. Netscape is six to twelve months ahead. But it's way early for either side to declare a victory."

At first glance, Microsoft seems to have some tremendous advantages. Top on the list, of course, is its sheer size. "Microsoft has enormous resources, so its pretty tough to bet against them," notes Cohen.

Microsoft also has the marketing genius of Bill Gates, the company's founder. "What makes technology companies great is that you don't have to be the first guy out with a product," notes Frederick Kobrick, a State Street Research portfolio manager who follows tech stocks closely. "The pioneers often are not the ones who take over the market."

What matters more than technical wizardry, says Kobrick, is business savvy. "Microsoft has invented almost nothing. Bill Gates' real calling card is understanding the business strategy of a technology company. You're not betting on a product, but on a strategy. This is going to be a management battle, and Gates has never lost one. He is better than anybody."

Money, of course, is important, too. And with its vast resources, Microsoft can continue to attract the best programmers to develop the next generation of 'Net-related software that will be in use eighteen months from now.

Another plus for Microsoft: its domination of the desktop computer market. That means it can bundle its browser with its operating system, which comes pre-installed in virtually all new personal computers (except the Apple Macintosh).

All these advantages, though, don't mean that Netscape will be toast in a year's time. First, size is not always such a clear advantage. Who would have guessed twenty years ago that IBM would get beaten up so badly in the personal computer market by newcomers like Compaq, or that the formidable Dell Computers would be started by a kid selling computers from his dorm room?

To understand why Netscape stands a chance to win the browser battle, though, you have to look beyond the traditional role of the browser. Viewing Web pages will continue to be important, but the real battlefield is in the market for applications that help computers on the Internet talk to each other at a more fundamental level.

Applications like these can help business users seamlessly link together parts of their in-house Intranet, or make useful connections between their Intranet and sites on the Internet itself. One example: applications that connect part of a program in a business desktop computer -- say a cell in a spreadsheet -- to a number that is updated regularly on a Web page, or a cell in someone else's spreadsheet in some other division of the company.

Microsoft and Netscape also hope to make money in the sale of tools used to develop these kinds of applications and maintain Web servers -- the computers into which Web surfers tap when they access a Web site.

"I think it is important to look beyond browsers," notes David Smith, of the Stamford Conn.-based Gartner Group, an information technology consultancy. "They are strategic, but not really what the game is all about. They are just a way to sell things further down the road. Microsoft wants to make sure it can continue to sell what it has been selling, which is operating systems, tools and applications."

Domination of the browser, applications and Web server market fits into Microsoft's strategy to make it less enticing for companies to use competing operating systems like Macintosh, Unix or IBM's OS/2, analysts say. "Microsoft wants to dominate the Internet market to the point where there is no market," notes Smith.

If the real playing field is the market for products beyond browsers, is there any reason to think Microsoft won't ultimately trounce the tiny Netscape there? You bet.

One is that information technology consultants like Gartner Group's Smith are advising business clients not to be seduced into an all-Microsoft environment. The reason? That would mean losing a lot of flexibility in the kinds of applications and products that can be used. Secondly, most companies already have an assortment of servers, mainframes and minicomputers in house. Going to a standardized Microsoft system would mean writing off the investment in most of them.

Netscape Navigator is suited to that kind of a hodge-podge of computer systems because it can run on a variety of "platforms," or operating systems -- including all versions of Windows, Macintosh and Unix. Microsoft's new Internet Explorer 3.0 can only run on Windows 95 and NT, and not on the still-popular Macintosh, Unix and Windows 3.1 systems.

Another reason to bet on Netscape: it has some powerful allies who are cheering it on because they don't want to see Microsoft get even more dominant. One is Oracle, which competes against Microsoft in the database management software market. "If Microsoft is successful in dominating the Internet and using it in developing these database applications, that will be a competitive threat to Oracle," notes Cohen.

Another is Sun Microsystems, producer of the Java programming language, which allows users to build applets -- mini-software programs that link portions of larger software programs together. Microsoft has its own answer to Java: ActiveX.

Companies like these are rooting for Netscape, says Stephen Dube, a technology stock analyst with Wasserstein Perella Securities Inc. "Oracle and Sun, among others, would like to see anyone but Microsoft alive. They want Netscape to survive."

But that doesn't mean Netscape can relax in the shadow of big brothers like Oracle and Sun, Dube points out. "These companies are interested in forming a defense against Microsoft, but they also want to make money. If in any way it gets to the point where they can make more money from something offered by Microsoft, they will."

For more Web-formation, visit:

* Nestcape * Microsoft

all of the Web for additional articles about

----------------------------------- Marketwatch for Monday, August 19, 1996 -----------------------------------

Dow Jones Industrial Average: up 9.99 to 5699.44

The Money 30 Index: up 1.09 to 1033.88

New York Stock Exchange Advances: 1230 Declines: 1036 Volume: 296 million shares

NASDAQ Composite: down 2.74 to 1130.91

S&P 500 Index: up 1.37 to 666.58

30-year Treasury bond yield: up 4 basis points to 6.80%

London gold (afternoon fix): up $0.05 to $386.25

Business Report | Marketwatch

----------------------------------------------------------------------------

[Pathfinder Navigation Bar]