Netscape Communications will make staff redundant, outsource parts of its business and streamline its reseller channel to stem a Q4 financial loss which has shocked both Silicon Valley and Wall Street.
The company expects a loss of between $85 million and $90 million for its Q4, which ended on 31 December 1997. Although its turnover rose by roughly 10 per cent over Q4 1996, Netscape chief executive Jim Barksdale admitted costs of $87 million and competition from Microsoft have pushed it into the red. Analysts expected Q4 profit of over $80 million.
Netscape?s European and Asian businesses were blamed for some of the poor sales figures - the two regions contributed just $7 million to its turnover.
Barksdale would not reveal which divisions or staff will be hit by the cost-cutting and redundancies but said all geographical areas will be affected equally and hinted that employees in telephone support, direct sales, administration and product development are the most likely victims.
Chief financial officer Peter Currie said some sales groups will be outsourced and the company will concentrate on a few resellers to cut costs. Barksdale admitted Netscape has struggled to fulfil its mission to grow into being an enterprise software company. "Because of a variety of factors affecting our enterprise business, growth is taking longer than expected," he said.
Netscape expects its 1997 turnover to increase to around $537 million but to make a loss of between $113 million and $117 million, compared to a $346 million turnover and $21 million profit in 1996. The 1997 figures include merger and restructuring charges of $87 million related to Netscape?s recent takeovers of Actra and Kiva Software.
Sources claim Netscape will begin giving away its browser software within weeks and Barksdale also hinted at that move after announcing the results prediction. Although Microsoft?s Internet Explorer is free of charge, the move would cut around 20 per cent from Netscape?s sales figures.
Currie explained that Netscape?s push into the corporate market was being hampered by long, complex product development cycles, competition and problems with closing deals, but he said more complex products should boost sales.
Analysts were surprised and disappointed with the revelation after Netscape?s figures had been increasingly good throughout 1997. Most agreed the Q4 disaster was a one-off but none forecast when Netscape will become profitable again.
Netscape shares lost over 20 per cent of their value on the day of the announcement but the company will announce its full results on 27 January.
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