AOL/Netscape: Merger talks confirmed, analysts speak up...
Published: 23 Nov 1998 16:45 GMT
The company said the discussion with AOL involves a stock-for-stock, pooling-of-interests transaction. Netscape would receive 0.45 shares of AOL for each share of Netscape. AOL is valuing Netscape at about 38 1/4, slightly below Netscape's closing price of 39 3/16. The deal would be valued at about $3.8bn (£2.3bn).
Bad news for Microsoft?
In the UK, James Eibisch a senior analyst at IDC believes Microsoft, including its online service MSN, will be affected if the deal goes ahead. "Both in terms of the number of users and the market share," he said estimating that as much as 5 percent of MSN's customers could be tempted away from the service with a new AOL deal.
Harry Hoyle, vice president of Internet research firm Inteco thinks the browser aspect of the deal is important as AOL would almost certainly ditch Microsoft's Internet Explorer in favour of Netscape's Navigator, giving the 14 million AOL users a new home page. "People don't tend to change their browser" said Hoyle, "by acquiring Netscape, AOL gains access to the default page and he who controls the start page, controls the whole community around that."
Hoyle believes AOL's decision to bid for Netscape is driven by the burgeoning e-commerce market. "AOL needs to generate revenue, and with free Internet access happening in the UK and undoubtedly soon in the US, AOL will be looking to advertising and transactions to create revenue." Analysts agree that AOL needs to become a commerce hub to maintain future growth with Eibisch citing Netscape's Netcentre as a promising start.
Netscape said there can be no assurance that an agreement will be reached and that it will report its earnings Tuesday. Wall Street is looking for earnings of 3 cents a share. In the third quarter, the company broke even showing signs that it's headed in the right direction.
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