Netscape reported a first quarter profit of only $7.9 million, down from $9 million in the same quarter a year ago. Revenues rose slightly to $120 million. The company's executive team blames the earnings fall-off to a tax increase and slower browser sales due to an impending release of a new browser in Communicator 4.0. Analysts, however, are saying that the numbers reflect stiff competition from Microsoft and Lotus. More importantly, Netscape signed a strategic deal with Yahoo! this quarter worth over $30 million. Had this deal not gone through, the financial results would have been more grim.

Predicting that Netscape was "sure to tumble" in the next four quarters, Charles Finnie of Volpe Brown Whelan & Co., a San Francisco investment bank, said that "Netscape's shift in focus to mission-critical software such as messaging and groupware puts them head-to-head with the most entrenched, best-financed, best-supported juggernauts in the world."

Netscape did mention that 38% of their revenue came from browsers (down from 51% a year ago), 37% from servers (33% a year ago), and 25% from services (16 percent a year ago). The growth in "services" is largely consulting work. According to CEO Jim Barksdale, who recently took a huge pay cut to calm investors, "There's an enormous opportunity for growth and profitability there.