You don't want to invest in the line of Microsoft's fire,'' says analyst David Readerman of NationsBanc Montgomery Securities. That's chilling news for Netscape, but it could be even more so for the industry. Netscape's fourth-quarter loss raises the specter that startups, no matter how innovative or pioneering, can't cut it in these digital times. Microsoft Chairman William H. Gates III may be right when he says that innovation in the computer industry has not been stifled. But Netscape shows there is an innovation ceiling.
Tech startups can thrive if they pick a lucrative niche.
Venture into a potential megamarket, however, and bigger competitors will stomp on you but fast. Thus the chances of a young company growing into a multibillion-dollar giant such as Compaq Computer Corp. or Cisco Systems Inc. are becoming rare. Instead, hot cyber-startups such as WebTV, Hotmail, and Diba Systems are selling out to the big guys, Microsoft and Sun. In the digital age, volume equals power. Netscape CEO James L. Barksdale understands PC economics, too.