Essay Netscape's Initial Public Offering Case

1550 Words Dec 20th, 2012 7 Pages
1. What is Netscape’s strategy? What must be accomplished if it is to be highly successful going forward? How risky is its current competitive position? (1 points)
Netscape’s strategy: * Firstly, Netscape with its strategy “give away today and make money tomorrow” offered people the free access to its software in order to build a customer base as well as the foundation of entering the Internet market. * After paying Spyglass a one-time fee for the original Mosaic code, Netscape made its own and new brand to occupy a position in the new field. * To set a new standard, Netscape created a rival program (named Mozilla and then changed to Netscape Navigator) to destroy Mosaic. * After setting the new industry standard,
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Normally, private investors would not have such big capital that can meet Netscape’s growing capital needs.

Sources to raise capital: * Borrow a loan from bank. Netscape can borrow money from bank but it should consider its leverage and repayment ability. Usually, banks would not lend too much money to a firm because of its low solvency. * Merge with other strong competitors, such as Microsoft. Merging can make Netscape share the resources with Microsoft, leading to a broader customer base, higher sales revenue and lower cost. Also, Microsoft would become partners. However, Netscape should think about the increasing difficulties in making a decision with its partner. * Private equity transaction. Netscape needs to look for a few big investors who can negotiate the price and shares. However, the cost of raising capital through private transaction is much higher than that through going public. 3. Can the recommended offering price of $28 per share be justified base on market multiples of other companies in the same industry (trading multiples)? (3 points) * Because Netscape has not yet turned into profit yet, so we can’t use P/E ratio to evaluate Netscape. One of the best ways

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