...successful intuition of Andersen lied on the fact that Netscape could reach a high degree of success (make money tomorrow) only if its software was known and used by the public. Thus, Andreessen was committed to distribute of software for free, as well as to a heavy invest in R&D. This strategy generated initial negative cash flows and clearly it was not sustainable in the long run. In order to become highly successful, Netscape had to be able to find the means to continue the invests in R&D, set the industry standard, outperform the competition, and ultimately be profitable. When Andreessen initiated his strategy the market was not competitive. However, Microsoft had the financial means and the reputation to potentially become Netscape’s direct competitor. Netscape was able to set the industry standards and create a good reputation. Ultimately, when the IPO took place, investors perceived the company to be the new leader in the market. Currently, the market is very competitive and the same strategy that made Netscape so successful it may not lead to the same results. New tech companies who focus on high growth, tend to raise capital in three main ways: creating an alliance, through venture capital or through IPO. A strategic alliance, would have provided not only capital but also assets to create economies of scale. It seems that an alley would provide much more than what Netscape needs. Netscape in fact, has a well functioning R&D and is settin...
Words: 2467 - Pages: 10
...* Question I * Why has Netscape been successful to date? What is its strategy? How risky is its current competitive situation? * * Answer I * Success reasons; * •First Movers advantage; * • Introduced “click-and-point” browser * • Introduced the concept of “Web Surfing” * •Worked on both sides of the market; * Browser for Clients, E-commerce application and service for companies * •Working in growing industry * * Strategy; * •Give away today, make money tomorrow. * •They gave the browser for free, and made money on the server side (by selling to companies) * •Dominate and set the standards, build ecology * * Riskiness; * •Although they were a newcomer, the industry has a Equity Beta of 0.73. So the industry was not that risky. * •Bigger players like Microsoft, AOL, Prodigy were also interested in the browsers business and entry barriers were not that high. Therefore, Netscape’s position in the browsers market was not rock solid. * * * Question II * Value Netscape * * Answer 2 * Based on researches on web, and considering industry conditions around 1995 – 1996, we decided to assume the average growth rate as 19% for Netscape. * * 그림1 * * The share distribution after IPO is given in the case as below. * * Share Holder Percentage * Clark 24% * Kleiner Perkins 11% * Media Companies 11% *...
Words: 540 - Pages: 3
...Equity Offerings Case: Netscape Initial Public Offering (HBS 9-296-088) Case Questions: Please use the excel sheet I prepared and uploaded on the Blackboard. I inserted already the assumption for your convenience. 1. Why has Netscape been successful to date? What is its strategy? How risky is its current competitive situation? 2. Value Netscape. Use the following assumptions: a. Total cost of revenues stays at 10.4% of total revenues. b. R&D stays at 36.8% of total revenues. c. Other operating expenses decline on a straight-line basis from 81% to 21% percentage of total revenues from 1995 to 2001 so that operating income as a percentage of total revenues is similar to Microsoft's in 2001. d. Capital expenditures decline on a straight-line basis from 45.8% to 10.8% as a percentage of total revenues from 1995 to 2001 so that capital expenditures as a percentage of total revenues is similar to Microsoft's in 2001. e. Property, Plant, and Equipment straight-line depreciate over 10 years. f. Changes in networking capital are essentially zero. g. Long-term steady-state growth of 4% annually after 2005. h. Long-term risk-free rate=6.71%, risk premium=6%, tax rate=34%. 3. How fast does Netscape have to grow on an annual basis over the next 10 years to justify the $28 offer price? 4. What sources of capital other than the public equity markets could be tapped to satisfy these capital needs? 5. What are the advantages and disadvantages of public ownership? 6. Why are many IPOs underpriced...
Words: 265 - Pages: 2
...Teaching Notes: Strategies Used by Microsoft to Leverage its Monopoly Position in Operating Systems to Internet Browser Markets Case Summary Microsoft is the world’s largest supplier of computer software. It has dominant market share of PC operating systems with its Windows system. High barriers to entry prevent significant competition in the operating systems market. The primary barrier is that a large number of software programs must be able to interface with any operating system to make it attractive to end users. It would be extremely difficult for any competitor to create a new operating system and create or encourage the creation of completely new software to compete with Windows. However, the development of Internet Browser programs, specifically Netscape, threatened this barrier, by allowing software developers to create software that could run using the browser software as a platform for the program. Therefore, software could be created that could still be used with Microsoft Windows, but would not have to be. Microsoft recognized this development as a threat to its operating system monopoly. Initially Microsoft attempted to divide the market with Netscape, but Netscape refused. To defend its operating system, it set about to overtake Netscape with its own internet browser, Internet Explorer. To defeat Netscape, Microsoft leveraged its operating system monopoly to gain market share in the internet browser market. Microsoft forced computer manufacturers...
Words: 1216 - Pages: 5
...Harvard Business School 9-800-050 Rev. September 30, 1999 Double Dealmaking in the Browser Wars (A) For months, the upstart Netscape Communications Corporation had battled the Microsoft Corporation over which browser the accounting giant KPMG would select for its internal use. On June 2, 1997, Netscape CEO Jim Barksdale finally heard the gratifying words that capped the see-saw dealmaking process: “You've re-won the business,” said Roger Siboni, Deputy Chairman of KPMG. “And I'd like to extend my personal invitation for you to give the keynote speech at our annual meeting in Orlando, Florida.” Delighted at the news, and visualizing the army of KPMG accountants, tax people, and consultants he’d be triumphantly addressing in August, the Netscape CEO thanked Mr. Siboni, and put down the phone. This was a crucial beachhead for Netscape in its quest for the corporate market. Netscape had initially won the KPMG contract, but Microsoft’s persistence had pried it back open. Beating back Microsoft’s latest challenge marked a great success for Netscape. This victory stood in sharp contrast to a far less happy dealmaking episode the previous year in which Netscape had tilted against mighty Microsoft for AOL’s browser business. In a sequence that gave some industry observers virtual whiplash, a pathbreaking Netscape deal with AOL had been announced, only to be undercut the very next day by Microsoft. Netscape’s ultimate loss in the AOL battle helped to define an Internet dealmaking...
Words: 7524 - Pages: 31
...Strategies Used by Microsoft to Leverage its Monopoly Position in Operating Systems to Internet Browser Markets Case Summary Microsoft is the world’s largest supplier of computer software. It has dominant market share of PC operating systems with its Windows system. High barriers to entry prevent significant competition in the operating systems market. The primary barrier is that a large number of software programs must be able to interface with any operating system to make it attractive to end users. It would be extremely difficult for any competitor to create a new operating system and create or encourage the creation of completely new software to compete with Windows. However, the development of Internet Browser programs, specifically Netscape, threatened this barrier, by allowing software developers to create software that could run using the browser software as a platform for the program. Therefore, software could be created that could still be used with Microsoft Windows, but would not have to be. Microsoft recognized this development as a threat to its operating system monopoly. Initially Microsoft attempted to divide the market with Netscape, but Netscape refused. To defend its operating system, it set about to overtake Netscape with its own internet browser, Internet Explorer. To defeat Netscape, Microsoft leveraged its operating system monopoly to gain market share in the internet browser market. Microsoft forced computer manufacturers to include...
Words: 411 - Pages: 2
...EF5052(A) INVESTMENT CASE 2 Netscape’s IPO Group 7 JU Fei LIU Yao LIU Yini WU Tianyi ZHANG Xuehui ZHANG Yiyun 52752084 52815259 52750804 52748187 52700026 52738944 Netscape’s IPO Brief Introduction Netscape Communication Corporation is going to issue its initial public offering in August 9, 1995. It is a young but rapidly growing company which is founded in April 1994 and only operates for 15 months. Netscape is also going through losses and never gain profits. But in the time of rapidly developing of the Internet, Netscape now had succeeded in capturing 75% of the Web browser market by using its most popular product, Netscape Navigator. Netscape has set the industry standard and is the indisputable leader of its kind. Netscape Navigator begun to ship in December 1994. Until then, Netscape did not earn significant product revenues. And Netscape Navigator generated more than half of total revenues for the company in the first two quarters in 1995. The other main source of revenues is generated by Netscape’s server and integrated applications products. In terms of the market share, we can say that Netscape has a promising future by using its excellent Web browser, Netscape Navigator. Another reason for its promising future is the industry background that Internet is in a rapidly developing position. However, Netscape is also facing kinds of competition in every market...
Words: 3858 - Pages: 16
...company contends that its actions are legal and says that there's no grounds of consumer indignation over the practices that the government is targeting. If the government wins at the trial court, it has already specified that it wants Microsoft to cancel contracts deemed exclusionary. In addition, the government wants Microsoft either to strip out its Internet browsing technology from Windows 98 or to include a rival browser made by Netscape Communications Corp. The plaintiffs alleged that Microsoft abused monopoly power on Intel-based personal computers in its handling of operating system sales and web browser sales. The issue central to the case was whether Microsoft was allowed to bundle its flagship Internet Explorer (IE) web browser software with its Microsoft Windows operating system. Bundling them together is alleged to have been responsible for Microsoft's victory in the browser wars as every Windows user had a copy of Internet Explorer. It was further alleged that this restricted the market for competing web browsers (such as Netscape...
Words: 959 - Pages: 4
...____________________________________ ) NETSCAPE COMMUNICATIONS ) CORPORATION, ) 466 Ellis Street ) Mountain View, California, ) ) Plaintiff, ) ) v. ) ) MICROSOFT CORPORATION, ) One Microsoft Way ) Redmond, Washington, ) ) Defendant. ) ) ____________________________________ ) Civil Action No. _____ JURY TRIAL DEMANDED (Per Local Civil Rule 40.5, Related to Civil Action Nos. 98-1232 and 98-1233) COMPLAINT This action follows the determination of Microsoft Corporation’s (“Microsoft”) antitrust liability in United States v. Microsoft, Civil Action Nos. 98-1232 and 98-1233, unanimously affirmed by the Court of Appeals, where it was found that Microsoft’s illegal acts had “inflicted considerable harm on Netscape’s business.” Netscape Communications Corporation (“Netscape”) thus brings this action against Microsoft to prevent further injury to Netscape, to restore competition lost in the market for Web browsers, to foster competition in the market for operating systems, and to receive treble damages compensation for the harms inflicted upon it by Microsoft. Netscape seeks this relief under Sections 1 and 2 of the Sherman Act, sections 28-4502, 4503, 4508, and 4510 of the District of Columbia Code, and under the common law, for harm resulting from Microsoft’s anticompetitive conduct in the markets for Intelcompatible personal computer (“PC”) operating systems and Web browsers worldwide. Plaintiff alleges as follows: Nature of The Action 1. In 1994, the year Netscape was founded, it released...
Words: 4949 - Pages: 20
...The Microsoft Antitrust Case* by Nicholas Economides** Revised April 2, 2001 Abstract This paper analyzes the law and economics of United States v. Microsoft, a landmark case of antitrust intervention in network industries. The United States Department of Justice and 19 States sued Microsoft alleging (i) that it monopolized the market for operating systems of personal computers and took anti-competitive actions to illegally maintain its monopoly; (ii) that it attempted to monopolize the market for Internet browsers because such browsers would create competition for operating systems; (iii) that it bundled its browser (Internet Explorer) with Windows; and that it engaged in a number of other anti-competitive exclusionary arrangements with computer manufacturers, Internet service providers, and content providers attempting to thwart the distribution of Netscape’s browser. The District Court Judge found in most points for the plaintiffs and ordered the breakup of Microsoft into two companies, one with all the operating systems software, and one with all other products of the company. The District Court also imposed a number of severe restrictions on the business conduct of Microsoft. We analyze the economic issues related to liability. We also analyze the applicability and effectiveness of the remedies imposed by the District Court and contrast them with other potential remedies. * Forthcoming in Journal of Industry, Competition and Trade: From Theory to Policy (August 2001)...
Words: 17051 - Pages: 69
...benefits to taxation as well as the normal mandatory sacrifices. This means that taxes can change to ease financial hardship just as they can be altered to increase individual expenditure. For instance, FS-2006-2 - Publication 4492 has created tax breaks for Katrina, Rita, and Wilma victims. Those who have been affected may now exclude from income certain cancellations of debt and extends, from two years to five years, the replacement period for converted properties. At this point a logical question to ask is who governs taxation, and how are benefits and penalties decided? Modern taxation extends all the way back to Section I of both Articles 8 and 9 in the constitution, and has been heavily influenced by America's sixteenth amendment to the constitution. Amendment sixteen gave Congress the power to tax any entity regardless of census or enumeration. At first glance, Amendment sixteen appears to grant supreme Paper 3 power to Congress to tax; however, that it not the exact case. The amendment did not expand the federal government's existing taxing power but rather removed any requirement for apportionment of income taxes (meaning tax on profit or gain from any source) among the states on the basis of population. In 1955,...
Words: 838 - Pages: 4
...and responsible competition. Microsoft is even quoted in the case that “it is committed to responsible and sustainable business practices that consider the social and environmental consequences of its actions”, but this after a decade of ethical and legal problems stemming from antitrust issues and several patent infringement complaints. The question is, would Microsoft have such a “positive reputation” today if we didn’t have the Sherman Act 1890, the Clayton Act 1914 and the Federal Trade Commission Act 1914 and if the Federal Trade Commission never began investigation Microsoft back in the early 1990s. Legal Issues Impacting Microsoft In the United States, Courts have held that a market share below 50% precludes finding monopoly power, and the leading treatise suggests that a share of over 70-75% for at least five years is required. While the law in the US allows creation of a monopoly, the courts have interpreted this to mean that monopoly is not unlawful “per se”, but if acquired through what the courts consider prohibited conduct, then it is unlawful. The Supreme Court also says, that a monopoly may engage in practices that any company, regardless of size, could legally employ; however, it cannot use its market power to prevent competition. Competitors, government regulators and I believe that Microsoft was acting as a monopoly power and engaging in unfair and unethical competition. In this case study, the appeals court held that Microsoft went beyond the...
Words: 506 - Pages: 3
...Notwithstanding, the benefits, e-commerce has also brought with it a plethora of novel legal issues, many of which remain unresolved. Courts have spent innumerable hours in a bid to compress the vast and seemingly boundless world of Internet commerce into the restrictive confines of commerce laws originally developed for a brick-and-mortar marketplace. Trademark laws have proven particularly difficult to stretch into this emerging technological arena. One of the most divisive trademark issues today is whether the sale of trademarks as “keywords” by Internet search engine companies constitutes trademark infringement. Courts in the United States, the United Kingdom and France are currently divided in opinion, but there are several high-profile cases pending which hopefully will provide some much needed clarity and resolution to this emerging...
Words: 1647 - Pages: 7
...Creating Competition in the Market for Operating Systems: A Structural Remedy for Microsoft Thomas M. Lenard, Ph.D. Vice President for Research The Progress & Freedom Foundation January 2000 ©Copyright 2000, The Progress & Freedom Foundation. All rights reserved. TABLE OF CONTENTS EXECUTIVE SUMMARY iii I. INTRODUCTION 1 II. MICROSOFT’S OPERATING SYSTEM MONOPOLY 3 III. NEW MARKET DEVELOPMENTS 5 A. America Online/Netscape Merger 5 B. America Online/ Time Warner Merger 6 C. Linux 6 D. Information Appliances 6 E. Web-Based Computing 7 IV. ANTICOMPETITIVE ACTS: THE NETSCAPE BROWSER 8 A. Market Division Proposal 9 B. Exclusive Arrangements with Original Equipment Manufacturers (OEMs) 9 C. Exclusive Arrangements with Internet Access Providers (IAPs) 10 V. OTHER ANTICOMPETITIVE ACTS 12 A. Java 12 B. Intel 12 C. IBM 13 VI. HARM TO CONSUMERS 14 VII. ALTERNATIVE REMEDIES 16 A. Conduct Remedies 16 B. Structural Remedies 17 1. Functional Divestiture 18 2. Full Division Remedy 19 3. One-Time Licensing Auction 21 VIII. The Hybrid Structural Remedy 22 A. The Minimum Scope of the Windows Company 23 B. The Applications Company 24 C. Addition of Products into the Windows Companies 25 D. Other Operational Issues 26 1. Shareholders 26 2. Intellectual Property 27 3. Employees 27 4. Contracts 28 ...
Words: 15664 - Pages: 63
...desktop computer market. Microsoft possesses footholds in other markets, with assets such as the MSNBC cable television network, the MSN Internet portal, and the Microsoft Encarta multimedia encyclopedia. The company also markets both computer hardware products such as the Microsoft mouse as well as home entertainment products such as the Xbox, Xbox 360 and MSN TV" ("Microsoft Corporation by eknowledge"). By law a monopoly is not allowed to exist in the US. It has been long discussion whether Microsoft is a monopoly or not? Among other charges Microsoft was charged with "monopolizing the computer operating system market, integrating the Internet Explorer web browser into the operating system in an attempt to eliminate competition from Netscape, and using its market power to form anticompetitive agreements with producers of related goods" (Economics: Resource Center). Because it obtained the current monopolistic state through innovation and its superior products many judge Microsoft a just monopoly. According to the website usdoj.gov Microsoft puts much money in research and development. This tells us that Microsoft wants to step ahead of its competitors. The market is still established and with the current potential for profit in this field a number of powerful firms have tried and entered the market and come up with operating systems competing with Windows. Linux and...
Words: 1648 - Pages: 7
