Harvard Der Spiegel

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Case Questions Why has Netscape been successful to date? What is its strategy? How risky is its current competitive situation? Netscape based its business model on the revolutionary free distribution idea of software used for the program Mosaic making user-friendly access to the World Wide Web available to consumers with a PC. Netscape purchased the rights to the code of Mosaic, offered their advanced program for free and penetrated the Web Browser market up to 75%. They expected to earn profits on the corporate side of the market which would be marketing their products to consumers using and purchasing Netscape technologies. The internet software market was rapidly developing itself in the mid-nineties, creating brand new opportunities for Software companies. These opportunities attracted more competitors in a short period of time, increasing risk for Netscape substantially. Value Netscape Using How fast does Netscape have to grow on an annual basis over the next 10 years to justify the $28 offer price? We can determine the correct growth rate by equalizing the estimated Equity value of Netscape with the implied Equity value through market capitalization. A growth percentage ?????? is required to adjust the Net Present Value of Netscape to meet the share price of $28. What sources of capital other than the public equity markets could be tapped to satisfy these capital needs? Two general sources of capital can be attracted to meet capital needs: Debt finance and Equity finance. Debt could be acquired to satisfy needs accompanied with possible advantages of leverage versus equity such as tax shield, agency benefits and avoiding control loss to shareholders. Debt can be issued in several forms like public or private, secured or unsecured, syndicated or bilateral. Netscape could decide to issue corporate bonds

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