NETSCAPE FAQ (frequently asked questions)
Francis Cebedo
Date: 8-3-95
By: Francis Cebedo
Q: Who are they and what do they do?
A: Netscape is a 16-month old company in Mountain View, Ca. Their
current products are Netscape Navigator, a World Wide Web browser, and
Netscape Server.
Q: What’s the big deal?
A: The World Wide Web on the internet is easily the greatest software
invention since the GUI interface was invented (e.g. windows, macintosh
user interface) back in 1985. Currently, a ‘race’ or a ‘revolution’ is
ongoing to get on the Web. Individuals and Corporations are both getting
access to the web (browse or surf) and supplying data to the web (put up
web sites or pages). An investment banking firm, Volpe, Welty and Company
estimated the internet user base to grow at a 62.4% annually compounded
rate. This would put the number of internet users to 550 million by the
year 2000. (if you have web access, please check http://www.vwco.com
for an intensive 30 page study )
Netscape Communications has come out of nowhere to dominate both aspects
of the web. They have 75% browser market share and is the leading (more
than 50%) server software supplier.
Q: How do they make money if they give their browser away?
A: Netscape charges anywhere from $5000-$50000 for their server software.
This software is the preferred way of building a Web site. A list of
hundreds of server customers is available from the Netscape Web site in a
section called ‘Galleria’. From April-Jun ‘95, Netscape revenues were
approximately $5 million for this product.
The Netscape Navigator is currently free to individuals for ‘evaluation’
purposes. Businesses and individuals who want telephone support however
are required to pay $50 for every copy used. From April-Jun ‘95, Netscape
revenues were approximately $7 million for Netscape Navigator.
Q: Is their management stable?
A: Netscape management rests on 3 key figures with incredible
credentials. The first is Jim Clark, a former Stanford professor who
started Silicon Graphics and made it a billion dollar company. Jim moved
on to start Netscape with a fresh college graduate, Marc Andreesen
(discussed below). The third key figure is James Barkesdale, who came
from McCaw Cellular. James is large attributed for McCaw’s rise into the
big leagues. The expectations from him for Netscape are no less.
Q: Who is Marc Andreessen?
A: Marc Andreesen at the age of 24 is already a legend in the computer
industry. He started coding at the age of 9 and has written some of the
most brilliant software at University of Illinois. He led a group of
co-students in designing and building Mosaic, the first graphical World
Wide Web application. He recruited some of the Mosaic crew into Netscape
and now has an engineering team that dominates Web development. One of
the key reasons Netscape products are so good is because Marc’s team has
a profound understanding of the Web and how people want to use it.
Q: When are they going public?
A: They are doing the Initial Public Offering (IPO) on the week of Aug.
7-11. The symbol is NSCP and the price has been announced at $12-$14.
Some sources (San Jose Mercury News) have mentioned Aug. 8 as the IPO
date but this is not yet verified.
Q: Why are they going public?
A: Because they can! Doing an IPO is the “promised land” for any start-up
company. Everyone involved with the company, employees and venture
capitalists get rich. In this case, VERY RICH. James Clark stands to make
about $300 million on IPO day. Oh yes, another reason to go public is the
company will accumulate a large sum of cash from IPO shares. The company
can use this cash for it’s expansion plans. The downside is Netscape will
be under tremendous pressure to make money. And all company decisions
will be scrutinized by stockholders. For example, if Netscape has a few
bad quarters, Jim and James will lose their jobs.
Q: What is the IPO price and how is it determined?
A: There is no standard formula for determining the IPO price. This is
part of the “black art” of doing an IPO. Basically, the underwriters
should set a price that will be supported by the market. They do this by
looking at the P/E for companies in the same industry. Or they look at
Market Valuation/Sales for other companies. Then they look at market
conditions, etc, etc.
Unfortunately for Netscape, the underwriters (specially Morgan Stanley)
have a tendency to underprice a hot IPO. For example, Premisys Corp. was
priced at $17 and the first trade occurred at $34 and Pure Software was
priced at $17 and the first trade was at $35. In both cases, the IPO
should have been priced at about $30, thus giving the companies the most
money for their IPO shares. Instead, the money (difference between the
first trade and the IPO price) goes to the customers of the underwriter
who bought IPO shares.
I think the Netscape IPO will be priced at $18.
Q: Can I get IPO shares?
A: No. The basic rule for an IPO is: “If you can get shares, throw it
back. The IPO is no good”. The Netscape IPO is one of the most highly
anticipated ever. Some estimate that it is 60 times oversold. Only the
friends of H&Q and Morgan Stanley will get any shares... period!
Q: What does an oversold IPO mean?
A: 2 times oversold means there is twice the demand for IPO shares
available. Thus if there are 3.5 million shares, 2 times oversold means
there is demand for 7 million shares.
Q: Where can I get open market shares?
A: The open market or aftermarket shares can be bought through ANY broker
after the IPO hits the market. Usually the price is bid up from the IPO
price already before it hits the market. Thus the opening price can be
sky high already
Q: What price can I get open market shares?
A: I estimate, that the IPO will be re-priced at $18. The first trade
will occur at $42.
These numbers are just my guesses. The reason why the first trade is so
high is that I’ve seen less promising companies go for $35 on the first
trade. This market is hot, software companies are hotter, internet
software companies are hottest, and Netscape is well... smokin!
Q: Can I buy this stock at margin?
A: No. This is an IPO stock and buying on margin is not allowed for the
first 30 days.
Q: Is this a risky investment?
A: Absolutely. The real risk here is the lofty stock price that this
company will command. An outrageously high price will mean short-term
volatility.
For one who believes in the industry, the company and it’s products, the
risk is not as high because they will be comfortable with the long-term
outlook for the company. These people can ride through the short-term
volatility and hang on for the medium or long term.
Q: Are there recent IPOs that indicate how netscape IPO will perform?
A: The best indicators of how Netscape is going to perform are the
recent IPO’s of 5 internet companies (Netmanage, Netcom, Uunet, PSI, and
Spyglass). Each one of these companies have climbed significantly higher
from their IPO’s
Q: How will the Netscape IPO affect the stock of other internet
companies?
A: If the Netscape IPO goes through the roof, the stock of all the other
internet companies will surge as well. In the stock market, companies in
the same industry group go in the same direction. It is clear that
Netscape will be the leader of this internet industry group.
If you believe that Netscape IPO will jump from the IPO price (as I do),
then investing in some of these other internet companies is not a bad
idea.
Q: What should I do?
A: Forget the $13 IPO price because it is NOT going to happen for you.
Decide now if you will buy Netscape if the price is in the $30s or $40s.
Then run to the store and get some Rolaids
Michael Cameron
Bob Leano
>Q: Are there recent IPOs that indicate how netscape IPO will perform?
>A: The best indicators of how Netscape is going to perform are the
>recent IPO=92s of 5 internet companies (Netmanage, Netcom, Uunet, PSI, and
>Spyglass). Each one of these companies have climbed significantly higher
>from their IPO=92s
In addition:
Let us not forget that the market has focused their attention to
technology stocks in the past 2-3 months, which attributed to the surge
in the stock prices. These companies market valuation at their current
prices are astronomical, bordering on comical, considering their earnings
history is non-existent. The other big question is: what is the
sympathy/love level of Wall Street towards tech stocks from this point in
time? I suspect Wall Street still loves them, since NASDAQ is at the
1000 level mark and has rebounded from the mini-correction during the
week of July 20. I assert that if the Street has turned their attention
elsewhere( retail, cyclical and other sectors' stocks ) at this point in
time, the stock prices of these internet companies will not be at their
current levels.
Threadgill
: >Q: Are there recent IPOs that indicate how netscape IPO will perform?
: >A: The best indicators of how Netscape is going to perform are the
: >Spyglass). Each one of these companies have climbed significantly higher
Remember the restaruant stock IPOs 2 years ago?
"When the ducks quack, feed'em"
Glen-Jay Glenesk
the size of its initial sale to the public from 3.5 million shares
to 5 million shares with a new indicated price between $21 and
$24 a share.
Wynn Quon
Hard to know where to start to comment on this.
How about some other Q's:
Q: How many shares will be outstanding?
Q: What's the market capitalization of Netscape at its IPO price?
Q: What did John D. Rockefeller say was the best time to buy stocks?
:-)
Q: .....
Anyway, all of these questions lead to the same general answer.
A: This may not be an easy way of making money.
Still, you only live once...so good luck!
--
Wynn Quon | The greatest of all gifts is the power to
Mitel Corp. | estimate things at their true worth...
| - La Rochefoucauld, "Reflexions"
Tony P. Krvaric
I also heard this from my broker. What is your source for this?
Does anyone know how many shares they will be releasing after the
increase? Any definite price?
I was told they will start trading on Thursday. I have been getting
up at 6 *AM* both Monday and Tuesday to get in early, and I will be
getting up tomorrow Wednesday as well, just in case. Of course on
Thursday I will be up as well.
I'd suggest folks setup *strict* guidelines of which prices and
quantities they'd be interested in, and them *sticking* to them.
Just so you don't get too much caught up in the hype and buy too
high. Personally I'd buy anything I can get my hands on if they'd
open below $20, but since they raised the price, that will not
happen. I am prepared to buy up to $35... If the shares open below
$30 I will buy a lot... Let's hope and pray... Heheh...
Sincerely,
Tony P. Krvaric
----------------------------------------------
E-Mail: str...@fairlight.com
Anon. ftp at: ftp.fairlight.com /pub/fairlight
Strider of FairLight says "No Risk, No Fun!"
----------------------------------------------
The opinions stated are those of myself only!!
----------------------------------------------
John
[...]
>Just so you don't get too much caught up in the hype and buy too
>high. Personally I'd buy anything I can get my hands on if they'd
>open below $20, but since they raised the price, that will not
>happen. I am prepared to buy up to $35... If the shares open below
>$30 I will buy a lot... Let's hope and pray... Heheh...
I wish the prediction by some analysts a week ago would be true that
NSCP would be at $14.5 in its first public offering. After reading
today's news, I am surprised that they will increase the price upto
$24. I don't know how much it will be after it reaches my hands.
I would wish that I could have made a few thousand bucks within
the first few minutes after I got it. Clark and Marc will have
$225 million bucks on paper tomorrow. They got millions shares
at a price of fraction of a penny per share. What a fair!
___John
John de Rivaz
share price has moved between UKP1.16 and UKP3.04. There has been some
criticism of its management on the uk.finance newsgroup, but this
hasn't dampened investors' enthusiasm for the stock. No doubt Unipalm
will benefit from any Netscape hyperbole.
--
Sincerely, ****************************************
* Publisher of Longevity Report *
John de Rivaz * Fractal Report *
* details on request *
****************************************
**** What is the point of life if it ends in death? ****
George L. Shiau
Why is there a ban of short sales for Netscape? I was actually
thinking about short selling, but a co-worker said don't bother
because no short sales are allowed on Netscape (he was trying all
day today 8/10/95).
If I was long Netscape, I would be worried.
George Shiau
John Chatterton
and responsiveness to customer-service issues. (A VP personally drove a hundred
miles on a Saturday to help me get set up on an alpha-test site.) They also
have a track record going back at least six years.
I don't know their balance sheet, but they're more real than Netscape.
John de Rivaz
writes:
UKP3.20 up 11 Friday close, range 3.21 - 1.16 PE not quoted. UK technology
stocks usually have lower PE than US ones.