Netscape's Barksdale: when the gamble pays off

Netscape's Barksdale: when the gamble pays off

In its first three years of existence, Netscape Communications has become the model for Internet start-ups hoping to turn their raw aspirations into viable, profit-making corporations. But in late 1994, as Netscape was running out of money and laying off employees, success seemed far from guaranteed. It was at that point that Jim Barksdale, formerly of Federal Express and McCaw Cellular Comm- unications, stepped in to become Netscape's president and CEO.

Things picked up after that: the company made one of the most successful public stock offerings and built the second most widely distributed piece of software in the world.

Though he doesn't see himself as much of a risk-taker, Barksdale had left a life of chauffeurs and a shot at becom-ing a titan in the telecommunications industry for the gamble of an Internet startup. Why? On a recent visit to Tokyo, Barksdale explained to IDG's Rob Guth his reasons for joining Netscape and revealed where the company's true value lies. By Rob GuthRob Guth: Aside from the obvious potential for huge financial gain, what was your primary reason for moving from a very established job at a very high-profile and established company to a startup?

Jim Barksdale: Probably the reason you do a lot of things - just to see if I could do it. To prove to myself that I could do it . . . What happened was that I had gone into McCaw with my eyes wide open, and then one thing led to another and then very quickly we had sold the company. While I was there I doubled the market cap [capitalisation] of the company. I was very proud of that, and we did some neat things in the business, and then Craig [McCaw, founder of the company] wanted to sell the business to AT&T. It was a good deal for Craig, and he should have done it. But from day one, I told [AT&T chairman and CEO] Robert Allen and Craig and others at AT&T that I didn't see myself staying with them because I didn't want to go back into a big company. I had made enough money - I didn't have to work and I was thinking about retiring.

GUTH: Why then take the risk of an Internet startup?

BARKSDALE: Because it was a risk. That's the point. You can make one heap of all your winnings and risk it on a game of pitch and toss, and lose and start again at your beginnings and never breathe a word about your loss. I just found that to be exciting. Plus it was a third bite at the apple. I had a great career at FedEx. I had a great time and career at McCaw, and I fell in love with Seattle and saw the Northwest experience. I got brave because I left the South where I had been for so long.

We also got into the position where our children were grown and moved away, so it was not like we had to keep worrying about where they were going to high school anymore. My wife is very supportive and enjoys new things, too. If I wanted to do it, she was very supportive. It was sort of the thrill of it, the fact that it wasn't a sure deal and the fact that you could make a big difference in a small startup. You can mould it the way you want to mould it. It had a lot of attraction.

Maybe someday I'll look back and say that was the dumbest thing I ever did. I don't believe that's true. It had the potential. They haven't closed the book on it yet. We've got a way to go before we sleep. It was the excitement in it. It was surely the potential to make some money - I won't deny that - but I had made enough money where I really didn't have to work anymore. It looked like a fun thing to do.

GUTH: Many of the things that seem fun at first -BARKSDALE: Turn out harder than you thought, and you look back and say, "Boy, did I kid myself."

GUTH: How does that relate to you now in terms of Netscape?

BARKSDALE: Harder than I thought, but a better upside than I'd ever imagined. The reward is much greater, and the risk is much greater. So at least it has balance. The worst is where the risk is greater and the reward is less. That's when you say "I've been had," or "I had myself."

GUTH: That reward goes beyond the financial gain?

BARKSDALE: You know what I mean. We've got a chance of really doing something significant and we've changed the way a lot of people do things. We've even changed the way people look at startups. We've changed the way IPOs are done. I read in Fortune or one of the magazines [Associated Communications CEO] Alex Mandl said he had left AT&T because Barksdale had done well in the stock market. I mean, my name gets to be used because it's a new way of looking at a career. Big offices and chauffeured limousines, and bowing and scraping - that can be very beguiling. At AT&T I was reporting to Bob Allen, had a shot at the top job, and I looked at it and said, "Why would I want that job?" That's a lot of pain for no gain.

GUTH: Do you consider yourself a risk-taker?

BARKSDALE: I don't know [if I am] more so than anybody else. I was fortunate in that I was at the right time in my life from a family-and-everything-else point of view. This opportunity came along to me, and if you put it to me two years earlier I probably couldn't or wouldn't have done it. Two years later, I probably wouldn't have been of the mind to do it.

There was a big pile of money sitting at AT&T with my name on it to stay there just two years, and the problem with that . . . the worst thing in the world is to wait exactly two years, collect all the money and then what? Then you feel like you've tricked everybody. So I said if I'm going to leave, I'm going to leave now. But I had several other big-sounding, fancy jobs that had been presented to me with a lot of the pomp and circumstance. I said I don't want to do that anymore, I want to try something else. A lot of it was just timing and circumstances which you really can't control. Most career changes have a lot more to do with time and place than people give credit to. They're never as planned as people on the outside think.

GUTH: I just finished a biography of investor Warren Buffet, and one point the book drove home is his ability to look beyond a company's stock price or single splashy product and find the intrinsic value of the company.

BARKSDALE: He also has a keen eye for the balance sheet. But in his annual stockholder letter and in the book that I read about him, that comes through, too - he had a feel for the entire tenor or the tone of the company.

GUTH: If Warren Buffet were to, hypothetically, look at Netscape, ignoring its stock price, what intrinsic value would he find? Where is the company's long-term, core value?

BARKSDALE: It's obvious. It's in the only place it could be in a business like ours. That is, our deep technical understanding of a very narrow but very important and potentially explosive technology.

GUTH: So the value is in the technical side of the company?

BARKSDALE: Well, we understand the making and the marketing of a particular technology called open systems software better than anybody. Better than Microsoft, better than Oracle, IBM or Lotus because it was our raison d'etre. It is the one thing that made us. And it's the thing that makes others keep falling behind. No matter how many resources, how many people, it is not in their soul.

It's not just the technology. It's the marketing and the distribution. There have been a number of things that Netscape has done uniquely and done particularly well that were revolutionary.

GUTH: It's interesting that you say marketing because many people point to Microsoft and criticise it for being more of a marketing company than a technology innovator.

BARKSDALE: I do think the technology - the understanding that [Netscape vice-president of technology, Marc] Andreessen and certain people in our company have, and I also include [marketing vice-president] Mike Homer in marketing - we are able to be extremely creative from a deep understanding of what makes us. And we've stayed true to that.

GUTH: And is that enough to keep Netscape successful?

BARKSDALE: I didn't say that. You asked me what the intrinsic value is . . . But that's as much of an advantage as you get in life: to have one core thing that you do better than anybody else.

Do you know what the core component of Boeing is? The one thing they would never farm out? The wing. Boeing always builds the wing. Everything else - engines, instruments, fuselage - they'll farm that out all over the world and reassemble it. But they know wings. My simple point is, it is a sad thing to me how many people - and I'm the same way - get outside a company and read all that you want to read about the business and try to understand the business, [but] the minute you are able to go inside the business you realise it is totally different. It's not 180 degrees different, but it's a good 15, 20 degrees different from what you thought it was when you studied it from outside.

GUTH: Looking at your career, what is the key strength that enabled you to succeed and that you bring to Netscape?

BARKSDALE: If I had to say it was one thing it would be that I think that I have some capability to listen to a number of points of view and to determine the most productive course to take - improving the business, getting into market or eliminating a product. Separating the wheat from the chaff and focusing the resources on the best opportunities. If you put that into one word, it would be "objective". Listening to a lot of different points of view and not being swayed by a person's eloquence or their degree of preparation or lack of preparation. I think I can weed out the good ideas from the general clutter and background noise.

GUTH: What then would be your biggest weakness?

BARKSDALE: I would not want to point out what I think is my main weakness. It's something I work on. It's not something I would want others to know about . . . I don't mean there to be any big intrigue or anything. It's just I'm in a very competitive market. I'd love to know what some of my competitors think their really deep-down, biggest weakness is.

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