To discuss the Dec. 18 Cover Story on the boom in IPOs, the guests on Dec. 10 were Peter L.S. Currie, chief financial officer of Netscape, and Christopher Farrell, economics editor of Business Week.
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Good evening and welcome to Business Week Online and our regular Sunday conference about the latest issue. Tonight's topic is the stock-market boom in IPOs (initial public offerings) that are fueling growth and innovation for the U.S. economy -- and creating billionaires overnight, such as Jim Clark at Netscape and Steve Jobs at Pixar.
The Cover Story of the current issue of Business Week (Dec. 18) tells all about the boom and its significance. And our guests are Peter L.S. Currie, chief financial officer of Netscape (whose IPO has made the biggest recent splash), and Christopher Farrell, economics editor of Business Week and principal author of the Cover Story.
Peter Currie joined Netscape in April, 1995. For six years before that, he held various management positions at McCaw Cellular Communications, including chief financial officer and executive vice-president of corporate development. From 1982 to 1989, he was with Morgan Stanley. He holds an MBA from Stanford and a BA from Williams. His screen name tonight is Currie6515.
Christopher Farrell (Soundcfbw) has been economics editor of Business Week since 1990, and you might know him from "Sound Money," a Saturday public radio call-in show on personal finance, where he's a regular. He joined Business Week in 1986, having previously worked at Business Times, a cable TV news program. He is a graduate of Stanford (BA) and the London School of Economics (Msc.).
The moderator is Jack Dierdorff (JackBW), consulting editor of BW Online and former managing editor of the magazine. And now on to our discussion -- and the questions you send us here on stage via the Interact button (the more the merrier!).
JackBW: Good evening and welcome to BW Online. Welcome, Peter Currie of Netscape. We're delighted to have you aboard. Hi, Chris Farrell.
Currie6515: Happy to be here.
Soundcfbw: Hello.
JackBW: Chris, I'm going to pitch the first question to you.
Question: Tell us a little bit about this boom in IPOs you wrote about. How does it compare with the past? And how big is it?
Soundcfbw: This is the biggest IPO boom in the past quarter century, and we are on track for a record quarter, with some $12 billion in new issues.
JackBW: We'll hear more about that later, Chris, I'm sure. Now, for Peter Currie.
Question: Netscape was certainly the most spectacular recent offering. Do you think all this investor excitement will be rewarded in the long term?
Currie6515: We are sure working hard toward that end, in a really big market.
JackBW: BobAB in New Jersey throws you this one.
Question: Peter, who in his or her right mind would buy Netscape at its current price?
Currie6515: Anybody who likes the risk/reward, in other words those who conclude that the products we have now, the critical mass of people dedicated to Net technology, the speed with which we can turn out new products (I hope!), and the scale of the opportunity warrants the price.
JackBW: PootN1 asks this.
Question: Were you suprised on how high Netscape opened, and then to see it drop like it did...?
Currie6515: Netscape is likely to be a very volatile stock (maybe we should have issued it with seatbelts), given the relatively small float and the widely varying points of view on our prospects, driven by the newness of the field and the difficulty investors and analysts have in predicting its future.
Soundcfbw: What can Netscape do as a public company that it couldn't as a private one?
JackBW: Are there advantages beyond the financial? Or special financial advantages?
Currie6515: Public is good for (1) raising money, (2) liquidity for investors, (3) trading currency for acquisitions, (4) credibility in the commercial marketplace (with your customers), and (5) visibility, to get attention for your products.
JackBW: RDBall reflects what a lot of investors must be wondering.
Question: Why have the Internet stocks surged so much despite the lack of fundamentals?
Currie6515: Look again at the fundamentals. NSCP's revenues this year have been $5, $12, $21 in successive quarters -- those look like pretty good growth rates. Same thing with the Internet service providers.
Soundcfbw: The technology's real -- everyone agrees about that. And so everyone is trying to figure out who will be the winner. But there is no sense this is a bubble«MDNM» in the classic sense -- all hype and no real technology -- just the opposite.
Currie6515: Unlike biotech, people can use this stuff now -- more tangible to them than two molecules dancing around.
JackBW: Chris, you have a question now for Peter?
Soundcfbw: We are seeing first-generation entrepreneurs seeding second- generation companies. Is this feeding on itself, and why?
Currie6515: Not sure I understand. You mean [Steve] Jobs and [Jim] Clark doing well in their second shots at companies?
Soundcfbw: Yes, that is what I mean -- and it seems widespread.
Currie6515: That means that (a) they're good, and (b) (perhaps more important) the opportunities being brought about by the communications revolution are huge.
JackBW: Chris, GAMBAL in the audience has a question that seems for you, at least first.
Question: To what do you attribute the increased interest in IPOs?
Soundcfbw: Part of the answer is the strong stock market. Part of the answer is what Peter mentioned -- the opportunities opened up by the communications revolution.
Currie6515: Partly a supply/demand phenomenon: Investors are flush with cash and looking for new spots to put it.
Soundcfbw: I also think during the late 1980s a lot of good companies were backed, and only in the past few years have they had the opportunity to go public.
JackBW: RDBall is back with a fascinating question for Peter.
Question: Will the hype surrounding Netscape be substantiated, i.e. do you think Netscape will become the predominant software company for the Internet, much like Microsoft has been for the personal computer?
Currie6515: I think we have a chance to be a very important company, if we execute very, very, very well. There is a new world in software, it seems, which will make the network (not the PC) the platform for applications, will create new distribution opportunities (i.e., over the Net), will create opportunities for developers just as the PC did in the early '80s.
JackBW: Speaking of Microsoft, here's the next question.
Question: What do you think about the strategy just announced by Microsoft, which seems to be turning away from its online service and trying to catch up in the Internet?
Currie6515: A complete change with respect to Microsoft Network. You're right -- it is Internet-oriented now.
JackBW: LovyDovy takes us on a slight detour.
Question: How many of these international high-tech companies are using derivatives to put their cash into? An exec from Intel admitted online here on AOL a couple of weeks ago that Intel does that.
Currie6515: Not us, and not for the faint of heart (if you're talking about unhedged option positions).
JackBW: SimonClark is at bat here.
Question: Question to Peter Currie: You mentioned the possibility of acquisitions. What general areas interest Netscape?
Currie6515: Areas where we identify holes in our current tech, and which will accelerate the development of new products, like our acquisition of Collabra, which gave us groupware functionality and a world-class team of managers and developers.
JackBW: Peter, take this next.
Question: What's your vision of how companies can make money on the Internet? Not just companies such as Netscape, but any kind of company?
Currie6515: All kinds of ways. Here are two: small publishers selling info electronically can use the Net for marketing, sales (promos/pricing), and distribution. Next, big companies, like FedEx, are using it to eliminate significant costs by setting up Net-based customer service vs. lots of telephone operators entering the same data into a legacy system.
JackBW: ManoloE has an intriguing line of thought.
Question: While you certainly have created huge market value, how do you compare yourselves with the leaders of shareholder value-creation, Coca-Cola and GM? What lessons, if any, have the Netscapes and Pixars of the present learned from these two companies?
Currie6515: That was GE, I think. Lessons? Brand names, relentless execution of a plan, customer service, and a high (and healthy) degree of paranoia.
JackBW: Now, from BIOLAW.
Question: Sorry I'm a latecomer, so I apologize if this question was already asked: How do you feel about the vision of Oracle's Larry Ellison regarding the future growth of *networked* boxes as opposed to PCs?
Currie6515: I'm a financial knucklehead, not a gearhead, but I think the machine running future client software might have to be beefier than the vision of a $500 box. If he's right, though, we'll have software for his Net device, and we do agree that the Net will be the platform.
JackBW: EAClark asks this -- and Chris, the answer is in your Cover Story sidebar, I think.
Question: Chris, please describe the "easiest" or "safest" way for individual investors to access the IPO market generally.
Soundcfbw: The easiest and safest way is to buy an emerging-growth or small-capitalization mutual fund. If you want to own individual securities, for most people it pays to wait at least a year -- you can pick up IPOs at a reasonable price, though you will miss some real gems, too.
JackBW: Next question.
Question: Peter, speaking of IPOs with a little history behind them --what's your guess re the outlook for America Online?
JackBW: And for online generally, vs. the Net?
Currie6515: Great, great marketers. Will continue to be in demand for editorial/formatting value-added to Net content, and for provided data-dial-tone (i.e., access) to the Net.
JackBW: How about this one, Peter?
Question: With your years at McCaw, you seem to have a propensity toward fast-growth companies in high tech. What kinds of special talent are necessary to succeed in that environment?
JackBW: Career possibilities for the younger folks?
Currie6515: A penchant for chaos. Beyond that, be sure to pick the right team to join, with regard to product, but also the caliber of the individuals. Everyone has to pull in the harness in the same direction for these small companies to work in the face of bigger guns (e.g., McCaw vs. telcos, Netscape vs ...).
JackBW: Chris, do you have an answer for MikeMerc in New Jersey?
Question: Why is it that the only the U.S. has an IPO market? If it's so important to creating business, why isn't it universal?
Soundcfbw: Other economies are dominated by banks, which tend to be risk- averse -- they want sound credits. For a variety of historic reasons, the U.S. financial system is dominated by the capital markets, which is more risk-seeking.
JackBW: A market-share question next. Peter?
Question: What is Netscape's share of the Web browser market at the moment, and what do you expect it to be a year from now? Same questions for the Web server software market.
Currie6515: Data is very hard to get with any accuracy. Other market research companies have put our client share at 67% to 75% (some higher); server share is harder to measure, since some servers live on the Net, and others live behind firewalls on private networks. Free software -- [we] still have the leading share, but we employ the authors of all the popular free Web server software.
JackBW: A quick word from a fan, FIREFLY12.
Question: It was the best investment I have ever made, I'm very new in the stock market. Keep up the good work!
Currie6515: It will be volatile. Strap in.
JackBW: Back to online vs. the Net...
Question: As the Internet landscape changes (with the advent of the World Wide Web, emergence of Java, etc.), do you think the traditional online services will lose market share or gain it as they make all facets of the Net simple for the masses?
Currie6515: Hyperbolic guess: The onlines will become pools of content on the Net and won't stay proprietary. They'll still market well, add editorial and format value, and provide Internet access for recurring revenues.
JackBW: Back to Microsoft.
Question: Peter, just how much of a threat do you think Netscape is to mighty Microsoft?
Currie6515: I think we have their attention, unfortunately, and they most definitely have ours.
JackBW: Any thoughts on the role of cable, etc., from ChiParent.
Question: Can you ask their views on the future structure of the industry, particularly telcos and cable firms?
Currie6515: Check out @Home -- a super-high-speed Net access company running on existing cable coax.
JackBW: LovyDovy sends this comment.
Comment: I think it's apparent that Netscape has just become David to Microsoft's Goliath!
JackBW: Any idea where the next hot IPO might come from? If I knew, I wouldn't be working here :-). And then it will be a wrap for tonight.
Soundcfbw: Open Market is an Internet company with a lot of interest.
Currie6515: A high-fashion company from Romania.
JackBW: Balkan boutiques, here we come! Thanks to both of you. That's it for tonight.
Soundcfbw: Thanks a lot
Currie6515: Goodnight.
OnlineHost: Thanks to Peter Currie of Netscape, Chris Farrell of Business Week, and all the BW Online team for this conference on the boom in IPOs. And thanks to all of you on AOL, with apologies to anyone whose questions we didn't have time for.
If you'd like to continue the discussion, we invite you to move to the BW Online Chat Room. Or you can post comments and questions on the BW Online Message Boards. Transcripts of this and all other BW Online conferences are available soon after the event (under Talk, Special Events, or Search BW, and for this one also in Investors Central, under What's New on the opening screen).
Mark your calendars for interviews with two distinguished authors: Richard Nelson Bolles of "What Color Is Your Parachute?" (Wednesday, Dec. 13, 8pm ET in the Odeon) and Peter Drucker of "Managing in a Time of Great Change" (Thursday, Dec. 14, at 9pm ET in the Coliseum).
And remember to join us in the Globe every Sunday at 9 pm ET for our weekly conference, usually featuring the Cover Story in the current issue of Business Week. Thanks again and goodnight!
Copyright 1995 by The McGraw-Hill Companies, Inc. All rights reserved.
