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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
JANUARY 27, 1998
Date of Report (Date of earliest event reported)
NETSCAPE COMMUNICTIONS CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 0-26310 94-3200270
State or other Commission File Number) (I.R.S. Employer
jurisdiction of incorporation) Identification No.)
501 EAST MIDDLEFIELD ROAD
MOUNTAIN VIEW, CALIFORNIA 94043
(Address of principal executive offices)
(650) 254-1900
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
On January 27, 1998 Netscape Communications Corporation ("Netscape")
announced a net loss of $0.22 per share on revenue of $125.3 million for the
quarter ended December 31, 1997, before the effect of a $56.3 million non-
recurring charge for in-process research and development and merger related
costs relating to the acquisitions of Actra Business Systems, LLC and Kiva
Software Corporation, and a $23.0 million non-recurring charge for restructuring
costs. After reflecting the non-recurring charge of in-process research and
development, the loss was $0.92 per share. With respect to the in-process
research and development and merger related costs, the actual charges in the
fourth quarter of 1997 were $4.0 million more than Netscape had previously
anticipated. With respect to the restructuring charge, Netscape had previously
estimated an expense in the fourth quarter of 1997 of $35.0 million, but that
charge will now be split between the fourth quarter of 1997 and the first
quarter of 1998. The restructuring charge has three components-reduction in
headcount, consolidation of facilities, and written-off intellectual property
related to systems or third-party technology. Netscape intends to take the
personnel related component of the charge, estimated to be $12.0 million, in the
first quarter of 1998.
The press release announcing these financial results is attached hereto as
exhibit 99.1 and is incorporated herein by this reference. This press release
includes "safe harbor" language pursuant to the Private Securities Litigation
Reform Act of 1995, indicating that certain statements about Netscape's business
contained in the press release are "forward-looking" rather than "historical."
A more thorough discussion of factors affecting Netscape's business plans and
competitive environment is included in Netscape's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996, and in its Quarterly Reports on Form
10-Q for the quarters ended March 31, 1997, June 30, 1997 and September 30,
1997.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(C) EXHIBITS
Exhibit No. Description
99.1 Text of Press Release dated January 27, 1998
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
NETSCAPE COMMUNICATIONS CORPORATION
Date: January 27, 1998 By:/S/ PETER L.S. CURRIE
Peter L.S. Currie
Executive Vice President and Chief
Administrative Officer
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INDEX TO EXHIBITS FILED WITH
THE CURRENT REPORT ON FORM 8-K DATED JANUARY 27, 1998
Exhibit Description
99.1 Text of Press Release dated January 27, 1998
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EXHIBIT 99.1<PAGE>
NETSCAPE ANNOUNCES FOURTH QUARTER, FULL-YEAR 1997 RESULTS
MOUNTAIN VIEW, Calif. (January 27, 1998) -- Netscape Communications
Corporation (NASDAQ:NSCP) today reported financial results for the
fourth quarter and year ended December 31, 1997. Revenue for the fourth
quarter of 1997 increased nine percent to $125.3 million, compared to
revenue of $115.2 million for the same period in 1996. The company
reported a net loss for the fourth quarter of 1997 of $88.3 million, or
a net loss of $0.92 per share, including non-recurring charges of $56.3
million in purchased in-process research and development and
merger-related charges and $23.0 million of restructuring costs.
Excluding non-recurring charges, the net loss for the fourth quarter of
1997 was $20.8 million, or a net loss of $0.22 per share, compared to
net income of $8.2 million, or $0.09 per share, in the fourth quarter of
1996.
Revenue for the year ended December 31, 1997, grew by 54 percent to
$533.9 million compared to $346.3 million in 1996. The company also
reported a net loss of $115.5 million for 1997, or a net loss of $1.23
per share, including $108.9 million of purchased in-process research and
development and
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merger-related charges and $23.0 million ofrestructuring costs. Excluding
non-recurring charges, net income for 1997 was $4.7 million, or $0.05 per
share, compared to $24.4 million, or $0.27 per share, for 1996.
As the company reported in a preliminary fourth quarter results
announcement on January 5, 1998, the slower than expected overall
revenue growth in fourth quarter 1997 compared with the year-earlier
period was due in part to competitive pressures that caused stand-alone
client revenues to decline. The decline in stand-alone client revenue
particularly impacted the company's European, Asian and retail
businesses. In addition, Netscape's enterprise software and services
revenue fell below expectations due to competitive pricing pressure and
longer sales cycles associated with new, more sophisticated enterprise
software products.
"No one factor contributed to the revenue shortfall we experienced in
the fourth quarter of 1997. Instead, a decline in stand-alone client
revenue and slower than expected growth in our enterprise sales and
support revenue left us short of our goal," said Jim Barksdale,
Netscape's president and chief executive officer. "We have taken
immediate action to address these issues by streamlining our business to
focus on key enterprise market opportunities and eliminating unrelated
expenses. This restructuring, combined with fourth quarter acquisitions
(Actra Business Systems, L.L.C. and Kiva Software<PAGE>
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Corporation) and the continued build-out of our enterprise sales and support
infrastructure, position us for industry leadership in 1998 in the growing
electronic commerce, messaging, custom Internet solutions and service provider
applications markets."
Since announcing its preliminary fourth quarter results earlier this
month, Netscape has completed a restructuring of its business to sharpen
its focus on enterprise software. As a result, the company has taken a
restructuring charge of $23.0 million in the fourth quarter of 1997 in
connection with a reduction in workforce, the closing of certain
facilities and other write-offs. "By moving quickly to adjust resources
to more aggressively pursue enterprise revenue opportunities, we believe
we are well positioned to return to profitability in 1998," Barksdale
added.
Last week the company announced plans to make the source code for the
next generation of its highly popular Netscape Communicator client
software available for free licensing on the Internet. The company
plans to post the source code beginning with the first Netscape
Communicator 5.0 developer release, expected by the end of the first
quarter of 1998. This aggressive move is expected to enable Netscape to
harness the creative power of thousands of programmers on the Internet
by incorporating their best enhancements into future versions of
Netscape's software. The strategy is designed to accelerate
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development and free distribution by Netscape of future high-quality versions of
Netscape Communicator to business customers and individuals, further
seeding the market for Netscape's enterprise solutions and Netcenter
businesses. Netscape also announced last week that it would make its
currently available Netscape Navigator and Communicator Standard Edition
4.0 software products immediately free for all users.
The information in this release contains forward-looking statements.
Actual results could differ materially. For a detailed discussion of
factors that affect the company's operating results, interested parties
should review the company's SEC reports, including Netscape's Annual
Report on Form 10-K for the year ended December 31, 1996, and Quarterly
Reports on Form 10-Q for the quarters ended March 31, June 30 and
September 30 of 1997.
Netscape Communications Corporation is a premier provider of open
software for linking people and information over enterprise networks and
the Internet. The company offers a full line of Netscape Navigator
clients, servers, development tools and commercial applications to
create a complete platform for next-generation, live online
applications. Traded on NASDAQ under the symbol "NSCP," Netscape
Communications Corporation is based in Mountain View, California.
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NETSCAPE COMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)(1)
December 31,
1996 1997
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $88,233 $55,172
Short-term investments 115,015 129,426
Accounts receivable, net 110,821 153,191
Deferred tax assets 20,347 37,336
Other current assets 16,928 19,961
Total current assets 351,344 395,086
Property and equipment, net 86,812 131,093
Long-term investments 90,504 76,698
Other assets 12,665 29,943
$541,325 $632,820
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable $27,752 $40,081
Accrued compensation and related
liabilities 17,175 23,193
Other accrued liabilities 12,788 18,266
Income taxes payable 7,731 2,709
Deferred revenues 80,308 106,170
Accrued merger related charges -- 8,911
Acrrued restructuring charges __ 3,685
Current portion oflong-term obligations
and installment notes payable 733 535
Total current liabilities 146,487 203,550
Long-term obligations 616 215
Stockholders' equity:
Preferred stock, common stock and
additional paid-in capital 404,072 549,196
Deferred compensation (6,128) (3,671)
Unrealized gain on
available-for-sale securities 50 3,433
Accumulated deficit (3,705) (119,201)
Cumulative translation adjustment (67) (702)
Total stockholders' equity 394,222 429,055
$541,325 $632,820
(1) Restated to reflect the mergers of Netscape Communications Corporation with
Kiva Software Corporation, which has been accounted for as a pooling of
interest.
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NETSCAPE COMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited) (1)
Three Months Year Ended
Ended
December 31, December 31,
1996 1997 1996 1997
<S> <C> <C> <C> <C>
Revenues:
Product revenues $96,075 $85,702 $291,183 $383,950
Service revenues 19,076 39,578 55,111 149,901
Total revenues 115,151 125,280 346,294 533,851
Cost of revenues:
Cost of product revenues 9,529 15,280 36,943 50,232
Cost of service revenues 5,318 10,544 13,124 31,557
Total cost of revenues 14,847 25,824 50,067 81,789
Gross profit 100,304 99,456 296,227 452,062
Operating expenses:
Research and development 27,202 35,918 83,863 129,928
Sales and marketing 51,850 82,211 154,545 272,110
General and administrative 11,223 18,065 30,981 50,356
Property rights agreement
and related charges 250 -- 250 --
Purchased in-process
research and development
and merger related
charges -- 56,348 6,100 108,935
Restructuring charges -- 23,000 -- 23,000
Total operating
expenses 90,525 215,542 275,739 584,329
Operating income (loss) 9,779 (116,086) 20,488 (132,267)
Interest and other income,
net 2,203 4,032 8,720 10,922
Equity in net losses of
joint ventures (926) (1,701) (1,928) (5,939)
Income (loss) before income
taxes 11,056 (113,755) 27,280 (127,284)
Provision (benefit) for
income taxes 2,898 (25,424) 7,763 (11,788)
Net income (loss) $8,158 $(88,331) $19,517 $(115,496)
Basic income (loss) per $0.09 $ (0.92) $ 0.23 $ (1.23)
Diluted income (loss)
per share $0.09 $ (0.92) $ 0.21 $ (1.23)
Shares used in computing
basic income (loss)
per share 89,844 96,396 86,548 93,989
Shares used in computing
diluted income (loss) per
share 95,186 96,396 90,841 93,989
Excluding non-recurring purchased in-process research
and development, merger, and restructuring charges, net
of tax effect:
Net income (loss) $8,158 $(20,771) $24,387 $4,651
Basic income (loss) per
share 0.09 (0.22) 0.28 0.05
Diluted income (loss) per
share 0.09 (0.22) 0.27 0.05
Shares used in computing
basic income (loss) per
share 89,844 96,396 86,548 93,989
Shares used in computing
diluted income (loss) per
share 95,186 96,396 90,841 97,499
(1) Restated to reflect the mergers of Netscape Communications Corporation
with KIVA Software Corporation, which has been accounted for as a pooling of
interest.
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