Netscape Communications Corp. basically broke even in its third fiscal quarter Tuesday, earning $88,000 on sales of $150.2 million. Even though that's better than most analysts expected, it's still too early to determine if the "new" Netscape is working.
First Call consensus expected Netscape (Nasdaq: NSCP) to lose 2 cents a share in the quarter.
Netscape shares closed up 1 13/16 to 32 1/8 ahead of the earnings report.
After falling victim to Microsoft Corp. (Nasdaq:MSFT) in the Internet browser battle, Netscape repositioned itself by focusing on the enterprise software market and throwing a ton of money into its Netcenter gateway.
The $150 million in sales was higher than most analysts expected. Although Netscape didnt blow away the Street estimates, it appears that it might be on the road to recovery.
"I have them at a 2 cent a share loss, but they could come in at break even," said Mary McCaffrey, an analyst for Bankers Trust Alex Brown.
She added that her revenue target for the quarter was $144 million, which would be above last year's tally if browser sales were removed.
A moving target
Year-to-year comparisons for Netscape are difficult since the company shifted its fiscal year last quarter. For the three months ending April 30, the company broke even with revenue of $127 million. By using some creative accounting, Netscape threw a $55 million loss in January into a financial black hole and forgot about it.
Shares of Netscape have been volatile, hitting a high in the 40s on portal euphoria and its Netcenter site and dipping into the 20s as enterprise software stocks fell.
"The stock has been completely schizophrenic," said McCaffrey. "When you see a spike it's because of the portals and it doesn't hold, if it dips it's because of the enterprise. I don't know how you get out of that erratic trend."
In the quarter, sales from its enterprise software and services business grew 16 percent during the quarter to $111.6 million, compared to $96.1 million in the previous quarter. Revenue from Netscape Netcenter increased 24 percent to $38.7 million for the quarter, as compared to $31.1 million for the previous quarter.
Better than anticipated
Daniel Rimer, an analyst at Hambrecht & Quist, was disappointed with Netscape's enterprise services revenue, which dipped from last quarter despite an intensive marketing push. Still, the company beat his estimates -- which were among Wall Street's most optimistic -- due to strong growth in Netcenter and enterprise product revenue.
"I think it's safe to say the company is back on track," Rimer said.
Lori Mirek, Netscape's senior vice president of marketing, said the company has finally found its niche with some of its enterprise applications. "These are areas where Microsoft and Lotus/IBM are not directly focused," she said.
In the quarter, sales from its enterprise software and services business grew 16 percent during the quarter to $111.6 million, compared to $96.1 million in the previous quarter. Revenue from Netscape Netcenter increased 24 percent to $38.7 million for the quarter, as compared to $31.1 million for the previous quarter.
We'll take it
"Overall, we are pleased with the results we posted for the quarter," said chief executive Jim Barksdale in a prepared release. "We're seeing strong momentum in both the enterprise software and Netcenter businesses as demonstrated by the number of significant customer wins announced during the quarter."
Also, Netscape announced that Bill Campbell, chairman of the board of directors at Intuit Inc., will join its board of directors, replacing John Warnock of Adobe Systems Inc.
Analysts said it was important for Netscape to beat the Street number this time around because even though most Internet companies are still losing money, they have typically shown losses that were smaller than Wall Streets forecasts, along with sales and traffic to their Web sites that exceeded expectations.
Nine of the 14 institutional investment firms following the stock rate it a "hold."
Netscape shares hit a 52-week high of 44 5/8 in September before tumbling to a low of 14 7/8 in February.
