Netscape's Work Culture


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Case Details:

Case Code : HROB013
Case Length : 13 Pages
Period : 1994 - 2000
Pub Date : 2001
Teaching Note : Available
Organization : Netscape
Industry : Information Technology
Countries : USA

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"It took Microsoft and Oracle 11 years to reach the size Netscape reached in 3 years, both in terms of revenues and the number of employees. Which is just cosmically fast growth."

- Marc Andreessen, Co-founder, Netscape.

"Netscape's relaxed work environment drives up productivity and creativity. Because there aren't layers of management and policies to work through, Netscape can turn out products in a month."

- Patrick O'Hare, Manager (Internal Human Resources Web Site), Netscape.

Introduction

On November 24, 1998, America Online1 (AOL) announced the acquisition of Netscape Communications (Netscape), a leading Internet browser company, for $10 billion in an all-stock transaction. With this acquisition, AOL got control over Netscape's three different businesses - Netcenter portal, Netscape browser software and a B2B e-commerce software development division. According to the terms of the deal, Netscape's shareholders received a 0.45 share of AOL's common stock for each share they owned. The stock markets reacted positively and AOL's sharevalue rose by 5% just after the announcement. Once shareholders and regulatory authorities approved the deal, Netscape's CEO James Barksdale (Barksdale)2 was supposed to join AOL's board.

Many analysts felt that this acquisition would help AOL get an edge over Microsoft, the software market leader, in the Web browser market. Steve Case, (Case) Chairman and CEO of AOL, remarked, "By acquiring Netscape, we will be able to both broaden and deepen our relationships with business partners who need additional level of infrastructure support, and provide more value and convenience for the Internet consumers."

However, a certain section of analysts doubted whether AOL's management would accept Netscape's casual and independent culture. Moreover, they were worried that this deal may lead to a reduction in Netscape's workforce, the key strength of the company.

A former Netscape employee commented, "People at Netscape were nervous about the implications of AOL buying us." Allaying these fears, in an address to Netscape employees, Case said, "Maybe you joined the company because it was a cool company. We are not changing any of that. We want to run this as an independent culture."

In spite of assurances by AOL CEO, it was reported that people at Netscape were asked to change the way they worked. In July 1999, Netscape employees were asked to leave if they did not like the new management. By late 1999, most of the key employees, who had been associated with Netscape for many years, had left. Barksdale left to set up his own venture capital firm, taking along with him former CFO Peter Currie. Marc Andreessen (Andreessen) stayed with AOL as Chief Technology Officer till September 1999, when he left to start his own company, Loud cloud. Mike Homer, who ran the Netcenter portal, left the company while he was on a sabbatical.

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1] Based in Dulles, Va., USA, AOL is the world's largest online services provider and a leader in interactive services, Web brands, Internet technologies, and e-commerce services.

2] James Barksdale had worked with FedEx as the COO and AT&T Wireless Services as the CEO.

 

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