SAN FRANCISCO -- Two of the Net's pioneers ended a chapter in the sector's history Wednesday as executives from
marshaled their ranks to outline the future of the companies as a merged entity.
During the meeting-cum-pep rally, executives spent most of their time describing the revamped structure of the merged colossus. The objective of the newly combined company, said the executives, is to become the dominant player in the Internet economy. Mixing Netscape's business software technology and weight as a Web portal with AOL's consumer brand and ISP prowess, said the executives, will create an unstoppable force as the industry continues to mature.
But getting there won't come without pain. Bob Pittman, AOL's president and chief operating officer, was the designated bearer of bad news, announcing that Netscape and AOL will each lay off between 350 and 500 workers. Pittman said the downsized employees would receive "generous severance packages" and assistance finding a new job, but he declined to specify what units would be axed. AOL also unveiled the management team and general strategy for its alliance with
Executives were reluctant to spell out the strategy in detail, saying that more information would be announced during the next few weeks. Pittman, however, did express commitment to several Netscape projects, such as
, new generations of Netscape's Web browser and Netscape's open source code project, dubbed mozilla.org. "The strategy is logical but it's the execution that will make it a success," Pittman said.
Analysts agree that the merger is a step in the right direction.
"It was a perfect match," says Jim Preissler, an analyst with
, who has a buy rating on AOL. "To be successful and meet the demands of corporate customers you need Netscape's software and services to go on top of Sun's hardware."
Because of the merger, AOL plans to take an undisclosed charge for the acquisition in its third quarter ending March 31. When the merger was announced on Nov. 24, the price tag was put at $4.2 billion. But since then, the value of the deal has soared to $10 billion, based on substantial gains in both AOL's and Netscape's stock. Netscape stockholders will receive 0.90 AOL common share for each share of Netscape common stock.
The newly merged company will be reorganized into four product groups: interactive services, interactive properties, Netscape enterprise and international. The new management team features all of AOL's key executives and a few senior executives from Netscape and Sun.
The interactive services group, which will be headed up by AOL's previous head of interactive services Barry Schuler, will contain NetCenter, browser product development and the AOL and
online services. Mike Homer, NetCenter's general manager, will become senior vice president and general manager of NetCenter and Web products.
The interactive properties group, to be managed by AOL Studios head Ted Leonsis, will contain AOL's recently acquired instant messaging service
, as well as
. The Netscape enterprise group, to be headed up by Sun's president of consumer and embedded devices Mark Tolliver, will provide end-to-end e-commerce solutions. Two senior-level Netscape executives, chief operating officer Barry Ariko and e-commerce head Steve Sauvignano, will join the enterprise unit. The international group will include the international operations of both AOL and Compuserve's Internet services. That group will be led by Jack Davies, the former manager of AOL International.
As previously announced, Mark Andreessen, Netscape's technology wunderkind, was named AOL's chief technology officer. And Jim Barksdale has relinquished his position as president and CEO of Netscape to sit on AOL's board of directors. Steve Case will remain AOL's chief executive and chairman, with the four product groups reporting on a day-to-day basis to Bob Pittman.
The announcements were made at a private all-hands meeting in a giant tent set up behind building No. 22 on the Netscape headquarters in Mountain View, Calif. About 2,000 Netscape employees filed into the tent to glean the future of the company and their own personal fates. But many employees left the meeting, which lasted about an hour and a half, without a clear sign of their future. Instead, Pittman promised everyone would know their status within two weeks.
"I recognize the transition is painful but it's also painful to work in a company that has bureaucracy," said Pittman. "The process will be fair and it we will do it quickly. We don't want this company paralyzed. But it is unrealistic to think that we'll find an opportunity for everyone."
"At least they're taking steps to get it done in two weeks," said one Netscape worker who requested anonymity. "Get it over with."
The meeting was heavy with cheerleading, but was also imbued with a note of melancholy as Netscape's Barksdale sought to bring closure to his term as the company's leader. "I don't know how many chapters are in this book," said Barksdale, "but we're gonna be part of it. I wish all of you the very best. Good luck and God bless you."
Barksdale then led the packed tent in a Netscape cheer and an AOL cheer before ending the meeting.