Wall Street likes Netscape's moves

Netscape Communications Corp.'s slew of new product announcements and streamlining of its sales divisions received a vote of confidence Monday when Cowen & Co.

Netscape Communications Corp.'s slew of new product announcements and streamlining of its sales divisions received a vote of confidence Monday when Cowen & Co. upgraded its stock from a "buy" to "strong buy" rating.

The improved rating fueled investor optimism as Netscape's stock soared to $44.75 per share, up $5.75 for the day.

Several factors led to Cowen & Co.'s adjustment: Netscape's new intranet server software for small businesses and individuals, updates to its popular SuiteSpot server software family and its commitment to install systems for small and mid-sized customers.

Analysts said today's upgrade was more a reflection of Netscape's positioning for the second-half of 1997 rather than excitement over the firm's second-quarter results which will be announced next week. First Call consensus has Netscape pegged for modest earnings of about 10 cents per share.

"Early customer acceptance of their new products has been very favorable and they make a very compelling sales pitch," said Jamie Kiggen, an analyst at Cowen & Co., based in Boston. "They are well positioned for the second half of this year as the only cross-platform, native Internet software provider. That translates into lower prices, which is how MIS departments make their decisions."

Netscape, based in Mountain View, Calif., rolled out two of its latest enterprise software packages Monday -- SuiteSpot 3.1 and SuiteSpot Professional edition -- two products that make it easier for corporate customers to buy and sell intranet solutions. The professional edition includes Netscape Compass Server 3.0 software for customers deploying sophisticated networked enterprises.

Company officials also announced a new team-selling approach with its indirect channel suppliers that will funnel all business leads of 500 seats or fewer through the company's reseller program.

"They're trying to get more than just the large corporations they typically serve by dropping the number of seats required for installation," said Joan-Carol Bingham, an analyst at International Data Corp., in Framingham, Mass. "By streamlining their sales organization, they're making it easier for smaller businesses to buy their products."

Mary McCaffrey, an analyst at Alex Brown & Sons, based in Baltimore, said Netscape's second-quarter results won't be spectacular, but the company's new products will bolster corporate software sales.

"The stage is set for Netscape to have a solid second half," she said. "It will be interesting to see how the new product cycles play out, but it's reasonable to assume their sales, especially in business applications, will be quite good in the next two quarters."

Increased competition from Microsoft Corp. and lower margins from server sales contributed to the lukewarm earnings expectations.

"If Netscape needed 60 percent of this market to survive, I'd be concerned," Cowen & Co.'s Kiggen said. "But they only need between 15 to 20 percent of their targeted markets to be a real player."