Article Writing Homework Help

Need an research paper on netscape navigator. Needs to be 2 pages. Please no plagiarism. 1. Netscape Navigator which is the company’s most outstanding product enables users to exchange information and electronic commerce (E-Commerce) on the internet. The navigator that has a user-friendly interface enables users to navigate the internet by manipulating icons and windows instead of using text commands. Moreover Netscape’s navigator provides other functions of the internet such as web browser, file transfers, news group communications and e-mail. For the quarters ended March 1995 and June 30, the navigator generated 49% and 69% respectively of the total revenue. Further more the navigator provided supplementary functions to other business and non business enterprises such as the provision of website space on the internet, place on the web where web browsers could visit, integrated application software programs to harmonize huge business transactions via internet and other full scale electronic commerce through seamless applications.

Netscape’s strategy was to set a new industry standard and to make money by creating a program that would destroy Mosaic which had 60% of the web browser market. The rival product was later named Mozilla and then renamed Netscape Navigator at the end of 1994.

Netscape faced competition form PC and UNIX software vendors and on-line service providers which where practically new entrants in the web browser, server and service markets especially as the internet and its demand increased in a rapid pace. Microsoft was also one of Netscape’s strongest competitors in the long run because in 1995 Microsoft released Windows 95 operating system which included a rival browser that was created from spyglass code. The Microsoft browser is very efficient and allows Windows users to access Microsoft Network, the company’s proprietary on-line service and broader Internet network access.

2. Netscape needed to raise money through initial public offering in 1995 because she needed to fund expected future growth, stockpile cash reserves for prospective acquisitions and also to acquire a better reputation and credibility within the industrial communication and technology industry. Going public was certainly one means of Netscape to source for new capital.

3. The advantages of going public arises the equity capital needs to increase to the point where the opportunity cost of remaining private and compensating investors for the lack of liquidity becomes to great relative to the lower cost of capital derived from liquid public markets. The disadvantages of going public involve the associated costs of being a publicly traded company and also the costs associated with the initial public offering.

4. Establishing a fair price for the offering of 28% is very difficult. There is not much to calculate as far multiples analysis is concerned. There are few true comparables to Netscape and strictly speaking Netscape had negative earnings and operating cash flows at the time of the offering.

5. Buying Netscape at 28% per share might be risky this because using the valuation model to access its financial performance, might not give a true picture of Netscape’s financial performance because of uncertainty surrounding Netscape’s future performance. Netscape’s value is seen most probable in the growth options that it possesses not in the cash flows arising from its assets. Buying Netscape’s stock is similar to buy an option on the web industry. There is so much uncertainty even though there positive aspects of its financial performance outweigh its negative aspects.

Cash Flow Valuation for Netscape

ACTUAL FORECAST

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Revenues

16,625

25,790

40,007

62,061

92,272

149,342

231,666

359,372

557,476

864,785

1,341,497

Cost of goods sold

1,731

2,693

4,177

10,051

10,051

15,592

24,188

37,521

58,205

90,290

140,062

Gross profit

14,890

23,097

35,830

55,581

86,220

133,749

207,478

321,851

499,271

774,495

1,201,435

R&D

6,115

9,486

14,715

22,827

35,411

54,931

85,211

132,184

205,051

318,085

493,430

Other operating expense

13,449

18,284

24,362

31,585

39,370

46,138

48,405

75,088

116,481

180,691

280,297

Operating income

(4,675)

(4,672)

(3,247)

1,169

11,440

32,680

73,862

114,579

177,739

275,719

427,708

Taxes

0

0

0

0

5

11,111

25,113

38,957

60,431

93,744

145,421

Net income

(4,675)

(4,672)

(3,247)

1,169

11,435

21,569

48,749

75,622

117,308

181,975

282,287

Cumulative tax loss

(4,675)

(9,347)

(12,594)

(11,426)

0

0

0

0

0

0

0

Capital expenditure

7,618

10,012

12,731

15,404

17,157

16,161

25,070

38,889

60,327

93,582

145,170

Depreciation

918

1,424

2,209

3,427

5,316

8,246

12,792

19,843

30,782

47,751

74,073

Free cash flows

(11,375)

(13,260)

(13,769)

(10,809)

(406)

13,654

36,471

56,576

87,763

136,144

211,190

Terminal value

Source: (http://www.brainmass.com/homework-help/business/finance/21019)

Assumptions

Riskless rate 6.71% Current shares outstanding 32,764

Discount rate 12.00% New shares 5,000

TV growth rate 4.00% Total shares 37,764

Changes in NWC 0.00%Value per share $28.00

PV of cash flows $173,587 Cost of revenues 10.4% of sales

PV of Terminal $883,971R&D 36.8% of revenues

Total PV $1,057,558 Other operating expenses Decline to 20.9% of sales by 2001

Capital expenditures Decline to 45.8% of revenues by 2001

Depreciation 5.5% of revenues

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Reference:

(http://www.brainmass.