Netscape has announced plans to axe up to 12 per cent of its workforce this week in response to projected fourth quarter losses - the first in its history.
Netscape, one of the most successful software companies to emerge from the Internet, has said it will lay off up to 12.5 per cent of its 3,200 employees as part of a restructuring programme. It refuses to specify which workers and operations will affected until full fourth quarter results are published on 27 January.
Netscape blames the job losses on fierce competition with Microsoft in the Web browser market. A survey published this month showed that MS Internet Explorer is now used by 63 per cent of Internet surfers, compared to Netscape?s 35 per cent, signalling the erosion of Netscape's former dominance.
These worrying figures are reflected in an expected loss of $14-18 million - 15-19 cents a share - for the quarter ended 31 December. Acquisition and restructuring charges will push the quarterly loss up to $89 million, worse than Wall Street predictions.
The market reaction to these surprise figures saw Netscape stock hit an all time low last week, although it went on to recover slowly.
Company chiefs hope to break into a profit later this year by relying less on their Web browser, which only amounts to 13 per cent of its revenue, and more on its emerging enterprise software. Ecommerce and business solutions make up a key part of this strategy.
Analysts were betting against a speedy recovery from Netscape. ?The browser market war is dead and Microsoft won that,? said Laurent Lachal, a software consultant at Ovum. ?They?re right to go for areas like ecommerce but any profits in this market are going to be long term, particularly in the European market, which is significantly behind the US.?
In addition, Netscape lacks the huge resources of industry rivals like IBM and Hewlett-Packard, according to Jim Priessler, an Internet analyst for Wall Street securities investment house Paine Webber. ?To compete as a consultant in the corporate enterprise market Netscape needs to build up lots of outside support. It?s extremely manpower intensive so it's totally different from its software market.?
He added: ?They?ve got to do all this from scratch and they simply haven?t got the leverage for this. I?d say they have a slim possibility of producing a profit this year. They need to think in the long term and not get carried away with cutting heads.?
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