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AOL Considers Switching to Netscape Browser, Sending Shares Soaring

Strategic Insights

— 2 min read

AOL's willingness to challenge Microsoft Corp.'s dominance in the Internet browser market has sent its shares soaring, while those of Netscape Communication shot up by $10 to $39.25 on the Nasdaq Stock Market. The potential switch would mark a significant blow to Microsoft, which is already facing antitrust regulators and a federal court case in Washington and California. AOL's browser contract with Microsoft is up for renewal at the end of the year, and analysts see this as a sign of the company's growing confidence.

Key Takeaways:

  • AOL's consideration of switching to Netscape's browser has sent its shares up $8.38 to $83.75 on the New York Stock Exchange, while Netscape's shares rose $10 to $39.25 on the Nasdaq Stock Market.
  • AOL has 14 million subscribers, making it the world's largest on-line company, while Microsoft Network has fewer than 2 million subscribers.
  • AOL has changed its strategy since signing its Internet-browser deal with Microsoft in 1996, beating back the Microsoft Network threat and acquiring Compuserve.
  • AOL has set a monthly record by sending or delivering more than a billion pieces of e-mail in October, with third-quarter profits reaching $108 million, more than triple that of a year ago.
  • AOL is taking advantage of the Justice Department's lawsuit against Microsoft in its negotiations, with Chairman Steve Case acknowledging that the deal with Microsoft had been crucial to fueling AOL's growth.
  • Analysts say the company may not be able to afford to alienate Microsoft, despite its growing market share and confidence.

Statistics:

  • AOL's shares rose $8.38 to $83.75 on the New York Stock Exchange.
  • Netscape's shares shot up $10 to $39.25 on the Nasdaq Stock Market.
  • AOL has 14 million subscribers.
  • Microsoft Network has fewer than 2 million subscribers.
  • AOL has sent or delivered more than a billion pieces of e-mail in October.
  • AOL's third-quarter profits reached $108 million.
  • AOL's stock has risen from about $21.25 in January to $83.75 yesterday.

Sources:

  • "AOL is discussing with Netscape officials the possibility of dropping Microsoft Corp.'s Internet browser and replacing it with Netscape's version," (The Wall Street Journal)
  • AOL shares rose $8.38 to $83.75 on the New York Stock Exchange, while Netscape's soared $10 to $39.25 on the Nasdaq Stock Market (The New York Times)
  • "Our shopping channel is the No. 1 shopping destination in cyberspace," said Wendy Goldberg, an AOL spokeswoman (The New York Times)
  • "AOL has changed a lot," said Abhishek Gami, an analyst at William Blair & Co. "They have beaten back the Microsoft Network threat, and that's significant." (The New York Times)
  • AOL Chairman Steve Case said yesterday that the deal to integrate Microsoft's Internet browser with AOL's software and having AOL as a feature on Microsoft's Windows had been crucial to fueling AOL's growth, according to Reuters (The New York Times)

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