Netscape Beats the Street, but Questions Remain

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What's going on with

Netscape

(NSCP)

?

Yes, it did report better-than-expected earnings Tuesday night, beating

First Call

estimates by 10 cents. Of course, the company didn't include the

month

of January in its financial sheet thanks to a shift in its fiscal year, but that's okay. And according to the company's own press release, it actually lost 98 cents a share in last year's second quarter, so this latest earnings number (zero cents a share) was a quantum leap better.

Confusing, isn't it? It's understandable when an investor (or reporter) can't make sense of Netscape's financial doings. But an analyst?

David Keil, an enterprise software analyst with

Robinson-Humphery

, says he couldn't put up with all of Netscape's financial maneuverings and dropped coverage of the stock a month ago. "They flipped around their fiscal year, making it really hard to cover the company," says Keil, who had a market perform rating on the stock. (His firm didn't participate in any of Netscape's public offerings.) Netscape moved up its fiscal year from Oct. 1 to Nov. 1, and reported the month of January separately.

Its January numbers weren't good: Netscape lost 58 cents a share on revenues of $8.32 million. "There wasn't that much business done in January," admitted Peter Currie, Netscape's chief financial officer, during the conference call. "We reduced our workforce, restructured our operations and changed our channel strategy -- we did an enormous amount of heavy lifting that month." The company announced in the middle of January that it was releasing its browser for free.

Netscape CEO James Barksdale also said that the company maintained its 60% share of the browser market, a key for Netscape going forward because it will determine how much it can charge advertisers and partners to be on its main Netcenter page.

Also on the plus side, Netscape is selling software products to more affluent customers and garnering better revenues from its Netcenter "portal" site. Netscape, which finally entered the portal wars earlier this year, reported a 42% increase in Netcenter revenues over its December quarter (from $21 million to $31 million). The Netscape Web site had 25 million hits in March, noted Barksdale, second overall behind

Yahoo!

(YHOO)

. Netscape also just completed a multimillion dollar deal with

Citibank

(CCI) - Get Report

-- its biggest ever -- to help build up the bank's online franchise. The size of the pact was not disclosed during Tuesday night's conference call. Questions about the company's financial sheet outweighed its new -- and so far more profitable -- emphasis on enterprise software sales and its Netcenter portal.

"Confusion is definitely the right word; this quarter is just one huge headache," says Andrea Williams, an analyst with

Volpe Brown Whelan

. "There just are no apples-to-apples comparisons so you can't put this quarter into perspective." Williams, who rates the stock a neutral, means that it's difficult to compare a February through April quarter with a 1997's January to March quarter.

Williams also pointed out that she was concerned about the January earnings numbers, specifically a $12 million restructuring charge. "I'm not sure what that is," says Williams, whose firm hasn't participated in any of Netscape's public offerings. When reporters questioned Barksdale and Currie about the irregular earnings numbers, Currie responded that these details will be addressed at the company's analyst presentation June 4.

TSC

knows of at least one analyst who won't be attending.