Friday January 23 9:11 AM PST

Netscape's harshest critic: A 'brilliant move'

By Margaret Kane

Netscape Communications Corp.'s decision to give away its browser and allow developers to license the source code for free was hailed as a "brilliant move" by one of the company's harshest critics Thursday.

Merrill Lynch analyst Bruce Smith, who has frequently chastised the Internet Wunderkind, said today that the deal essentially gives Netscape (NSCP) access to "an army of unpaid developers."

As first reported by ZDNN, the company originally suggested the freebies a few weeks ago, after reporting dismal quarterly results. At the time, the company said that market forces -- namely Microsoft Corp. -- were behind the idea. Microsoft (MSFT) gives away its Internet Explorer browser, and has significantly bitten into Netscape's share of that market.

But Wednesday's announcement goes beyond giving away both the Navigator and Communicator programs. Netscape will post the source code for the new version of Communicator on its Web site, to allow users to modify the program by adding whatever features and functions they like.

The source code will be available for modification and redistribution later this quarter when the company releases the developer version of the software. Netscape will also set up a special Web site for downloads, and discussions of the code.

In essence, Netscape will make Navigator and Communicator almost public-domain browsers, said executive vice president Mike Homer, who compared the business model to the ones behind the Apache Web server, a freeware product that currently enjoys a 44 percent market share.

"Take a look at how successful Apache [is] based on an army of unpaid developers. Netscape will tap into that same army," Smith said. "This potentially can negate Microsoft's tremendous resource advantage. That was a brilliant strategic move."

Taking on Microsoft was, of course, the whole point. Microsoft's browser pricing, or lack thereof, cut very effectively into Netscape's dominance of the browser market.

CEO Jim Barksdale said Thursday that the company believes its browser market share is in the low 60s while Microsoft's is in the low 20s (though other surveys show that Microsoft has narrowed the gap considerably). And while Netscape is willing to forgo revenue from its browsers, it still needs that share.

"Our strategy going forward is to use the browser to drive the Web site business further and grow the enterprise [software business] further," Homer said. "Now that it's free and we'll have the support of the Internet community behind us, we expect that will drive growth of enterprise and Web site businesses."

Homer elaborated a bit on the logistics of the public source code, stating that the licensing deal required developers to let Netscape have access to any enhancements they make to the product. Netscape could then include those enhancements in future versions.

The deal will also allow third parties such as hardware manufacturers or Internet service providers to re-brand the software with their own brands, something that could be very attractive to PC makers, particularly in light of Thursday's announcement regarding Microsoft's Internet Explorer program.

"I think the whole point is to say, 'Look, Microsoft is providing it for free. We're not only providing it for free, we're letting everyone get to it.' It's really providing an alternative to Microsoft," said Hambrecht & Quist analyst Dan Rimer.

See Also:
Netscape offers up browser, source code, for free
Netscape 'very pleased' with Microsoft ruling
AnchorDesk: Can Netscape regain its momentum?
Netscape expects Q4 loss of up to $89M