AOL Time Warner has left its Netscape subsidiary with almost no resources, according to a source close to the company, and will soon cease to employ the venerable browser project's remaining staff.
The cutbacks at Netscape are more severe than had been indicated by AOL, which said on Wednesday it was laying off 50 employees involved in Web-browser development at Netscape. In addition to the layoffs, AOL has moved all but a handful of Netscape's staff onto other projects, sources said. The changes have left only a skeleton crew to manage the transition of Netscape's browser-development activities to a non-profit organisation called the Mozilla Foundation.
According to a Tuesday email from AOL staff member Dan Veditz, later posted on a public Web forum, the Netscape application developers who were not laid off were transferred to a messaging client project called AOL Communicator. Veditz said that the team working on Gecko, the engine behind the Netscape and Mozilla browsers, had been "dismantled", and the evangelism team "cut in half and dispersed".
A source close to the company claimed that there were fewer than six remaining staffers working on the browser project. "They are doing a few last things with the Gecko engine and they will be onto other things soon," he said.
The restructuring marks the latest setback for AOL subsidiary Netscape Communications, which has fought an increasingly lopsided battle with Microsoft for browser market share. Microsoft's Internet Explorer is currently used by more than 90 percent of Web surfers, according to site visitor statistics published by Google.
Netscape suffered the latest blow at the hands of its parent last month, in a sweeping deal with Microsoft guaranteeing that AOL would offer Internet Explorer as the default browser to subscribers to its proprietary online service for the next seven years.
At the same time, Microsoft is stopping development of IE as a stand-alone product, leaving users of operating systems such as Unix, Linux and Mac OS reliant on Mozilla and other browsers for Web access.
The loose Mozilla.org group, which had overseen the open-source development efforts of the Mozilla browser upon which the Netscape browser was based, is transforming itself into a nonprofit foundation, funded in large part by a $2m (£1.25m) donation from AOL and $300,000 from Lotus founder Mitch Kapor. Mitchell Baker, who will be president of the new Mozilla Foundation, said the group would use part of its seed funding to hire "a core group of people", which would include project managers and "key technical contributors", for the open-source project.
AOL's purchase of Netscape, when announced in November 1998, was valued at about $4.2bn. By the time shareholders approved the deal the following March, a run-up in the price of AOL stock had inflated the price tag to nearly $9bn.
The Mozilla open-source browser project has travelled a bumpy road over the past year. Its long-awaited first full release was followed by a snub from Apple, which passed over Mozilla in favour of another open-source technology for its Safari Web browser. Not long afterwards, the project switched direction -- choosing to base future versions on Web standards rather than on code specific to operating systems -- in an effort to shrink the size of the program. The last major release before the change in direction was distributed to the developer community late in June.
In addition to AOL, Red Hat and Sun Microsystems continue to support the Mozilla project, which could help their own push towards the use of open-source software as a replacement for Microsoft products.
CNET News.com's Evan Hansen contributed to this report.