Netscape shares fell by 18 per cent yesterday after an influential stock watcher cut his rating on the browser company from 'buy' to 'accumulate'.
The decision by Deutsche Morgan Grenfell analyst William Gurley reflects more general concerns in some quarters of Wall Street that Netscape's browser war with Microsoft will slow its growth.
Share price tumbled by more than $10 to close at $47.875 yesterday. Gurley had written in a research report that, although Netscape was likely to "meet or exceed" analyst expectations for its fourth quarter, investors expecting more dramatic results would "find this news disheartening". Analysts are predicting that Netscape will almost double its earnings per share in the quarter from six to 11 cents, on revenues up over 180 per cent to around the $115 million mark.
Investors' chief concern about Netscape is the threat from Microsoft, even though it has not lost much browser market share yet. Gurley's opinion is particularly influential because Deutsche Morgan Grenfell underwrote a recent secondary offering of Microsoft shares.
Most of Gurley's report is positive about Netscape's long term outlook, pointing to its decreasing dependence on browsers and its signing of some major corporate customers - although its recent loss of showcase customer Chrysler was another factor worrying Wall Street.
Official Netscape reaction was "surprise" at Gurley's action, but vice president of marketing Mike Homer said it was unjustified but "probably inevitable" given the high expectations Netscape has built up with its dramatic record of earnings growth.
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