You'll get your Mac news here from now on...

Help TMO Grow

Advertising Info

The Mac Observer Express Daily Newsletter

More Info

Site Navigation

Columns & Editorials

by Wes George



and Trading.

Mmmmmmm...... Good

AOL Buys Netscape-An Analyst's View
November 30th, 1998

Don’t you just hate the accelerating pace of technological change nowadays? Even the business of technology is changing too fast to keep up-to-date on all of it. I know I’m confused by this last week’s turn of events. AOL buys Netscape. I don’t get it.

America Online Inc., based in Dulles VA, is buying Netscape, of Mountain View CA, but it’s going to continue its deal with Microsoft to push Internet Explorer as its preferred Browser. In fact, AOL’s deal with Microsoft puts its services in the face of anyone who has just installed Windows. Netscape believes that the AOL Microsoft alliance was the lynchpin that undid Navigator’s dominance as the world’s preferred browser.

AOL Chairman, Steve Case, says he has other more grandiose plans for their newly purchased Netscape browser. Such as somehow melding it with AOL’s ICQ Internet chat software into a Frankenstein bloatware that does it all: chats, searches, mails, browses, organizes dates, checks your grammar, phone numbers, drives the kids to school, etc. The visionaries at AOL see some kind of super all-purpose portal to the cyberuniverse as being the killer app of the millennium. One size fits all with plenty of banner ad space.

Excuse me while I puke.

Is it possible that AOL paid too much for Netscape? An engineering manager at Netscape told the Wall Street Journal last week, "We should have stopped shipping this code (for the Navigator browser) a year ago. It’s dead. This code should have been taken out back and shot." Harsh words for a code that just earned the company a 4.2 billion-buck price tag.

If Case’s big plan for Netscape is to build the browser directly into the AOL portal, I’m still confused. Supposed experts tell me that this is AOL’s bid to become the Microsoft of the Internet. AOL’s rocket scientists believe that some version of ICQ mainstreamed into a user-friendly browser is the Windows of the future. ICQ (I Seek You) is a way for people to communicate and exchange files in real time with each other online. As the masses swell like a tide of lemmings towards online activities in the next couple of years, AOL is gearing up for the onslaught. With the purchase of Netscape and the deal with Sun, they have marketing, software and the main computer supplier for the Internet usage under one roof.

Of course, none of this creepy deal really has anything to do with the Mac-centric universe. Unless you are sentimental like myself and remember Navigator 1.0 or Mosaic as your first browser. Ah, good old Navigator one point whatever, only half the RAM hog that is the Johnny-come-lately cyborg called Communicator. Those were the good old days. Remember FreePPP? And who can forget the wonders of Open Transport 1.1.1? One could actually get online with it, unlike Open Transport 1.0 which was so buggy that it was actually one big bug. It took me two months to figure out how to make it all work to get online for my first time in the fall of 1995. O.k., so I’m no rocket scientist. Still, my wife’s hairdresser, who had never even touched a mouse before she bought an iMac last month was online and sending us massive server stomping e-mail enclosures within hours of unpacking her shiny new iMac. Kind of takes the sense of achievement out of logging on if you don’t have to sweat the details of half a dozen undecipherable protocols.

Yes, I’ve always had a soft spot in my heart for Netscape. I felt they were a company like Apple, innovative, idealistic and pivotal in their industry. In true pioneer fashion Netscape’s leaders Jim Clark and Marc Andreessen practically invented the face of the World Wide Web.

Like Apple, the reverse engineers at Microsoft also ripped off Netscape. It’s truly shocking to the average layman how close the Internet Explorer Application is to Navigator in every way. Yet this state of affairs somehow manages not to be a copyright violation. IE is a landmark example of how refined an art the collaboration between corporate law and engineering has become to be able to craft a product so clearly a violation of Netscape’s intellectual property, yet still with the letter of the law even while pissing on the spirit.

Of course, Microsoft’s chief counsel Duke, I mean, Bill Neukom is pleased as punch over the AOL purchase plan for Netscape, "The Deal drives home the point that the marketplace can take care of consumers far better than the government can", he says. The marketplace is exactly what Microsoft is crushing with its Windows monopoly. There is only one bully on the block bigger, uglier and meaner than Microsoft and that’s the Federal Government.

Now that Netscape has sold out to AOL an era has come to an end but the larger Saga of the Internet continues. No longer do we have Netscape, David-like; doing battle with the Goliath of Microsoft and sort of holding it’s own. Instead we have AOL swallowing Netscape whole and aligning with Sun against Microsoft. AOL is a much less sympathetic protagonist than a Netscape or Apple.

Sure AOL innovated and has prospered while making it’s shareholders wealthy. However, AOL’s main innovation has been a mere marketing triumph, not in the same league as the creative leap of mind that brought the world Mosaic. They’ve perfected a way to dumb down the Internet, stuff the portal with in-your-face ads and sold an image to a Middle America too tired or lazy or mediocre to want the real true undiluted web experience. AOL is the Velveeta and wonder bread version of the WWW. The Saga of the Internet will continue to unfold, but I find myself less emotionally involved with the cast as the founders fade into memory.

According to David Yoffie and Michael Cusmano of Netscape, authors of Competing On Internet Time: Lessons From Netscape And Its Battle With Microsoft, (Free Press, 1998), "One of the ironies of this merger was that Netscape had twice spurned AOL’s offers of alliance, both at times when Netscape was flying high and AOL had a value of less than 10% of its potential partner. Today the tables have turned: AOL is worth $40 billion, while Netscape is being bought for $4 billion."

From a purely sober business point of view, AOL’s purchase of Netscape is a high-risk gamble with all the cards stacked against a successful merger. The history of mammoth high tech mergers is strewn with wrecked corporate structures, broken visions of grandeur and profit flung to the wind.. Netscape, in spite of their recent positive quarterly gains, is a company with problems. AOL is a company with more cash than brains. It’s an all too common marriage made in hell. AOL’s head-swollen management think they can swallow Netscape’s pill and whatever ill Netscape may have they can fix. More likely Netscape’s problems will become AOL’s. But we’re talking Internet business here, where all bets on predicting the future from past models are off, so who knows?

Things get even more convoluted when you throw Sun into the equation. A number of observers have pointed out that all three have entirely different corporate cultures that are likely to clash on all levels in the decision making process. The wooly and wildly undisciplined hackers at Netscape have yet to release a bug free version of software. The geeks at Sun are more like old school Unix and mainframe nerds without a daring bone in their thin client bodies. The management at AOL will have to guide the interface between these cultures with sufficient finesse to make it all come together. Somehow. The only thing that can really be said for sure at this juncture it that AOL is Going For It.

Check out the Apple Trader Forum in the new Mac Observer Forum section! Talk about Apple's stock, the markets, or give your best stock tips, just come on in!

The Apple Trader's Most Recent Columns

The Dawning Of The Age Of Aquarius?
January 2nd

Apple's K-10 And Apple's Future
December 18th

Apple's Stock: A Double Your Money Gamble?
December 4th

The Apple Trader Forums

The Apple Trader Archives

Back to The Mac Observer For More Mac News!

Wes George writes about the financial side of being a Mac nut. Wes has followed Apple's finances for the last 7 years and comes to The Mac Observer every Monday to tell all about his opinions. He is, in his own words, "inordinately fond of money." If you would like to write Wes, make it nice. Someday you might own a company that has something to do with Apple, and Wes will probably still be writing for The Mac Observer...... On the other hand, Mr. George is known to love a rousing, hair-raising debate, so send him your worst!

Disclaimer: This column is for informational and entertainment purposes. While Mr. George may be sage indeed, his writings can not be construed as a solicitation to buy, nor an offering to sell any particular stock. As with any trading in the financial markets, you must use your own judgment to make the best trades that you can. Neither The Mac Observer nor Wes George may be held accountable for trading advice.

Today's Mac Headlines

[Podcast]Podcast - Apple Weekly Report #135: Apple Lawsuits, Banned iPhone Ad, Green MacBook Ad

We also offer Today's News On One Page!

Yesterday's News


[Podcast]Podcast - Mac Geek Gab #178: Batch Permission Changes, Encrypting Follow-up, Re-Enabling AirPort, and GigE speeds

We also offer Yesterday's News On One Page!

Mac Products Guide
New Arrivals
New and updated products added to the Guide.

Hot Deals
Great prices on hot selling Mac products from your favorite Macintosh resellers.

Special Offers
Promotions and offers direct from Macintosh developers and magazines.

Browse the software section for over 17,000 Macintosh applications and software titles.

Over 4,000 peripherals and accessories such as cameras, printers, scanners, keyboards, mice and more.

© All information presented on this site is copyrighted by The Mac Observer except where otherwise noted. No portion of this site may be copied without express written consent. Other sites are invited to link to any aspect of this site provided that all content is presented in its original form and is not placed within another .