NETSCAPE -- DAVID RE.

ADEEMAN
Tape 143
30
Numbers are going to be so big that people are going

to realize that there was real business done So

every major business whether its The Gap or Disney

is going to have to have commerce web sites So youre

going to get major capital spending cycle for

information technology you know hardware cabling

networking gear Its going to be much broader than

just investing in alnazon You want to buy the

equipment thats going to be part of the business to

business solution think those are the names you

really want to go after -p 15

think that the private capital is representedflby

venture capital money in the valley and then public

equity capital you know here in San Francisco and

New York is readily available for internet financings

In fact really those have been the only financings

that have taken place in the fourth You

quarter

know we led managed Ticket Masters City Search

which is taking local city guides with on-line

ticketing Stock was up 4X off the initial public

offering You have U-Bid which is another E-commerce

name We did Infospace which is aggregating

advertising That stock is up 4X So there is

incredible enthusiasm in the market for Internet

investment vehicles Thats bound to attract the best

and the brightest to be able to sort of come together

with capital good ideas capital and an equity market

thats ready to fund them think dont think its

brain drain dont think its negative event

In fact think its really pretty positive that

youre seeing these major new business formations and

really think fundamental re-structuring of

American economy along that sort-of e-commerce

03
Well think entrepreneurship is in think

business is in small business is in think clearly

kids spending more time on-line whether its gaming

or surfing the web is becoming major recreational

event And do think in fact major publication

Forbes had an article that indicated that kids are

deferring college and just gding right into starting

up business What makes that possible is that the

barriers to entry of designing website and being on

line are actually very low do think that in the

long run however that as businesses get larger and

become more complex to manage that those advance

degree skills are going to be in demand Theres

burst of energy to create these think that for

longevity and sustainability of businesses wouldnt

count education out

pC552
Well it really has been an amazing last four to five

months in terms of the just boom in internet stock

prices and then the subsequent merger announcement

between America Online and Netscape If we flashback

Netscape was trying to promote the notion of the new

web economy They had signed over the summer

think very significant deal with City Bank where

they were going to license their E-Commerce software

and at the same time City Bank was going to pay

Netscape somewhere in the order of about $40 million

dollars to be the primary portal site for finance

on the Netscape Business So had this

you interesting

synergy developing between the enterprise software and

the portal business In terms of the stock the stock

wasnt doing much of anything think quite frankly

people were beginning to understand that the

Department of Justice was gearing up with this lawsuit

against Microsoft Jim Barksdale was going to be the

opening witness in the governments case And so some

shrewd investors were beginning to sort of size that

Gee Netscape has nothing to lose And therefore

with the stock in the mid-twenties really whats my

downside risk But what really started to get the

stock going wa the speculation that maybe something

was going to develop between AOL and Netscape AOL

had made business announcement regarding the Portal

side of Netscapes business As think most Web

historians know AOL made very significant decision

to use the Microsoft Internet Explorer as the browser

front end and therefore not use the Netscape product

And so the fact that there might be some

rapprochement between these two parties really started

to get people very excited That all culminated in

the November 24th announcement that fact there was

an announcement for pro forma agreement really

subsequently the next day Netscape ally released

the results for the October period The fact is that

the results really werent that stellar in my opinion

The portal business the Internet business came in

little bit ahead of plan and the licensing business

was slightly behind plan Net it all out and were

basically about break even It wasnt they didnt

deliver big profit upside they didnt deliver real

loss but they were just trying to sort of get both

sides of the house in order do think that the

combination though of AO Netscape is really

very bullish and the street has responded accordingly

AOL is up about 40% since the time of the

announcement Netscape stock because its now hinged

to AOL on the exchange ratio as announced by the deal

is up about 25% So Netscape shareholders probably

more important Netscape employees quite frankly

done quite well as result of the announced merger

Well we do see in the Valley many start up companies

tha art of sprint out of the gate and then know

you

disappoint and as we say sort of crash and burn

guess the footnote the postscript on Netscape is that

they didnt quite crash and burn they maybe just kind

of logged off And they logged off by merging into

larger entity America Online So think Netscape

certainly had profound impact in the broadening of

consumer business adoption of the Internet Certainly

the Netscape browser is what like to term sort of

the dashboard to the Internet so that we dont have to

deal with sort of these cryptic TCPIP commands had

profound impact think that will be long lasting

But Netscape as an independent company will not And

think that whats really going to be quite telling

is whether the employees of Netscape that have those

entrepreneurial juice if in fart thy acc-limat and

thalargerenti
Online It was very dynamic organization but smart

programmers with readily available capital in the

valley and good ideas can start new business So

that sort of start rise and then move on to som hing

else is very indigenous cycle in Silicon Valley

2q3
Well think that for any entrepreneur there has to

be passion for what theyre doing cause it involves

certainly over the short term some tremendous

personal sacrifice many hours at work lots of travel

for people on the sales think theres need to

constantly be first to market So speed wins cause

theres always the larger competitor whether its

Microsoft up north in Redmond or it might be an

Oracle in the enterprise system space that has more

resources that you do and therefore can cover more

ground To be able to establish beachhead in the

market arly get early adopters build some

groundswell of enthusiasm behind what youre doing

have independent proof statements of that And then

think whats absolutely critical is management and

that management sets vision that the entire company

can rally behind and just give their all to So in

some ways maybe its little bit like cult but

maybe with more positive outcome to it theres

by no means guarantee of success And so nk that

fear of failure is always there and glories of success

are maybe measured in different ways think

engineers take tremendous in bringing to market

product that changes other peoples lives think

theres bit of the lets change the world through

technology in very positive way think in terms

of other people in the firm obviously stock options

can be very intoxicating financial reward But it

-t

can be very ephemeral because the volatility of the

stock market as deal with on the financial side is

very volatile and can change quite radically think

the money is nice Quite frankly its almost

requirement so that you can afford housing in Silicon

Valley But think theres sense of Gee were

out to do something pretty special and were working

with some pretty special people and so the

camaraderie the esprit de corps which defines the

culture is something that people are really pretty

proud of Because at the end of the day think

people really want to be proud of what they do who

they work with and that theyre making difference in

the
LI-t
world
absolutely agree with that in the following sense
P.t3
heres this notion called the mythical mammoth in

software programming And that is that it you put

hundred programmers on an assignment will you get

better code than if you two programmers that are truly

outstanding in there field And think quite frankly

the track record shows that its better to go with two

extraordinary programmers because managing the hundred

is what creates the problems So sure absolutely

theres the David and Goliath the Entrepreneur verses

the large company thats part of the culture thats

the excitement in really getting these companies off

the ground Now the challenge is once the products

 e\11tO

developed you do need the infrastructure of sales and

post sales support and marketing and finance to really

get big and have worldwide presence Now the Web

magnifies some of that and creates an alternative

distribution system that maybe doesnt have to be

quite as large But invariably that infrastructure

really has to be there to have profound impact on

companies and consumers

loball3 r12

Job mobility is part of the American culture whether

its the western migration or the creation of major

new businesses Certainly in the Valley job-hopping

is not looked do uponhe challenge think is

why is somebody moving If its simply to sort of

surf private companies to capture stock options to

then wait for the company to go public think

potential manager will invariably see through that and

that may sort of slow that persons mobility But

think that to the extent that individuals need to feel

intellectually challenged they need to feel that

theyre making contribution and bright people need

those demands To the extent that theyre in an

organization that doesnt offer that then they

generally do move on think thats why the greatest

challenge for many of these companies to grow and

successful is management How do you continue to

provide culture and environment so that you continue

to not only attract but to retain the best and

brightest And think thats really the challenge

for managing the entire valley So that you dont

have this constant cycling of employees but really

can retain and really build something that has

longevity
v9o50

think the Valley typifies profound change in that

knowledge and peoples knowledge is more important

than building or the assembly that makes widget

out the other end Its what comes out of somebodys

brain maybe through keyboard that gives rise to

product that is worth seeing is producing greater

economic value for the US economy than necessarily

hard good that comes down an assembly line And so

that shift in value creation really puts more of an

emphasis on the individual and the individuals

creativity and the individuals innovation And if it

requires these sort of human-touch perks-- inging

 .57
your dog to work as opposed to having preferred

parking place and maybe country club membership and

all the other traditional smokestack industrial age

perks--maybe thats not so bad

think the history of societies is that

hunter/gatherers generally dont evolve into large

successful cultures But those that actually take

more agrarian approach produce there own food that can

support management whether it be government or

whatever tend to be the surviving societies think

in many respects there are lot of nomadic tribes in

the Valley call them Java progranmers or

programmers but the very successful as measured by

fi ancial terms companies those large cornpas

that have roote nd created culture that enables

the best of both So Intel Sun Oracle are very

important companies in Silicon Valley that have very

large employee bases And so think those companies

have very special human resources challenge and

think that theyve been able to produce the likes of

the P5 out of Intel and the Sun Sparks Server out of

Sun and the new advanced Oracle data base to mention

few shows that they accommodate those workers in

way and programmers that they feel theyre engaged

in their challenge the same time what is so

CAt

dynamic about the lley are the discontent rebels

if you will that choose to band together and maybe

form new society new company around new idea

and give it go Many more of those fail than

succeed But whats great is that the new business

formation process enables them to do it to give it

try And think the American economy is much better

off for that mobility that access to capital that

people with bright ideas can go out an start new

businesses and really challenge the entrenched

comPetitors

Integrating when big company acquires small

company integrating that new company is challenge

certainly know that myself--when the bank acquired

the partnership that was part of And so new

value system is introduced it may clash or meld with

the value systems that exist And then employees make

choices They balance the pros and the cons of

staying versus going off to other opportunities So

thinkit relates to erica Online clearly they

see brand in Netscape that stands for something

they see very strong worldwide presence on the

Internet that AOL would like to leverage They in

fact AOL term that very important brand So just

as AOL has managed brands they will have to manage

the expectations of the people who helped create it

think were entering new era for Netscape and my

bet is that 50% or more leave and go off and try to

build other things And some that like the security

quite frankly of larger company and maybe buy into

the vision of Bob Pitman and Steve Case whove done

fabulous job will find new challenges and will stay

But dont think we quite know exactly how that will

shake
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