Netscape Communications Corp - Conflict With Microsoft

CONFLICT WITH MICROSOFT

In January 1997 Netscape joined an alliance with Oracle, IBM, and Sun Microsystems to develop common standards for all of the company's software products. The NOIS alliance, as it came to be known, was seen as a response to Microsoft's growing dominance in several key sectors of the software market. Netscape also released Communicator, the successor to Netscape Navigator.

By 1997 Netscape's leadership position in the browser market was dwindling. Early in the year it still had about 70 percent of the market but was losing market share to Microsoft's Internet Explorer. Microsoft had introduced Internet Explorer 2.0 in 1995 after the company had licensed Mosaic from Spyglass Inc., which had obtained the rights to the Internet browser from the University of Illinois. In August 1996 Microsoft shipped Explorer 3.0, which was considered to be the equal of Navigator. However, it was the introduction of Internet Explorer 4.0 in 1997 with Windows that caused the most serious erosion of Netscape's position. By bundling Internet Explorer with its operating system, Microsoft made the Internet accessible from the computer user's desktop and, at the same time, eliminated the need for a separate Web browser.

The U.S. Department of Justice, with the support of Netscape, complained that Microsoft was guilty of anticompetitive behavior in marketing its browser and asked a federal court to fine the company $1 million per day. A November 1997 survey of corporate information technology (IT) managers by the magazine Computerworld revealed that 59 percent of them felt that tying Explorer to the operating system gave Microsoft an unfair advantage. While most of the survey respondents were using Navigator, more than half said they would switch to Explorer in 1998. By April 1998 Microsoft had captured some 40 percent of the browser market, while Netscape's share had shrunk to 60 percent. Netscape's share of the browser market would decline even further, and Netscape CEO Jim Barksdale became more vocal in accusing Microsoft of unfair competition. When the Department of Justice filed an antitrust suit against Microsoft in 1998, Barksdale was the first witness to be called.