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Financial Summary
Netscape Communications Corporation
Condensed Consolidated Statements of Operations
 (In thousands, except per share data)
(Unaudited)
  Three Months Ended Year Ended Ten Months Ended
  September 30, 1997* October 31, 1998 December 31, 1997* October 31,
1998*
Revenues:        
Product revenues $ 108,822 $ 88,225 $ 383,950 $ 261,457
Service revenues 43,246 73,800 149,901 186,352
Total revenues 152,068 162,025 533,851 447,809
         
Cost of revenues:        
Cost of product revenues 10,362 7,532 36,579 27,313
Cost of service revenues 20,645 33,130 77,118 90,717
Total cost of revenues 31,007 40,662 113,697 118,030
         
Gross profit 121,061 121,363 420,154 329,779
         
Operating expenses:        
Research and development 32,734 37,111 132,808 123,238
Sales and marketing 62,588 70,148 237,321 213,004
General and administrative 11,272 11,717 50,357 42,715
Purchased in-process research and development and merger related charges - - 108,935 -
Restructuring charges - - 23,000 12,000
Goodwill amortization - 1,526 - 5,088
Total operating expenses 106,594 120,502 552,421 396,045
         
Operating income (loss) 14,467 861 (132,267) (66,266)
         
Interest income, net 1,235 2,322 9,062 6,873
Other income (expense), net - (510) 1,860 7,976
Equity in net losses of joint ventures - - (5,939) -
         
Income (loss) before income taxes 15,702 2,673 (127,284) (51,417)
Provision (benefit) for income taxes 5,479 - (11,788) -
         
Net income (loss) $ 10,223 $ 2,673 $ (115,496) $ (51,417)
         
Basic income (loss) per share $ 0.12 $ 0.03 $ (1.34) $ (0.54)
         
Diluted income (loss) per share $ 0.10 $ 0.03 $ (1.34) $ (0.54)
         
Shares used in computing basic income (loss) per share 88,018 97,892 86,058 95,993
         
Shares used in computing diluted income (loss) per share 99,156 103,726 86,058 95,993
         
         
* Certain prior period amounts have been reclassified to conform with the current period presentation.
         
Excluding non-recurring purchased in-process research and development, merger, and restructuring charges, net of tax effect:
       
Net income (loss) $ 10,223 $ 4,199 $ 4,651 $ (34,329)
         
Basic income (loss) per share $ 0.12 $ 0.04 $ 0.05 $ (0.36)
         
Diluted income (loss) per share $ 0.10 $ 0.04 $ 0.05 $ (0.36)
         
Shares used in computing basic income (loss) per share 88,018 97,892 86,058 95,993
         
Shares used in computing diluted income (loss) per share 99,156 103,726 89,568 95,993

Netscape Communications Corporation
Condensed Consolidated Statements of Operations by Segment
 (In thousands)
(Unaudited)
  Three Months Ended July 31, 1998 Three Months Ended October 31, 1998
  Enterprise Netcenter Other Combined Enterprise Netcenter Other Combined
Revenues
Product revenues $ 92,293 $ - $ - $ 92,293 $ 88,225 $ - $ - $ 88,225
Service revenues 19,291 38,650 - 57,941 25,799 48,001 - 73,800
Total revenues 111,584 38,650 - 150,234 114,024 48,001 - 162,025
 
Cost of revenues:
Cost of product revenues 10,499 - - 10,499 7,532 - - 7,532
Cost of service revenues 19,316 6,122 - 25,438 24,742 8,388 - 33,130
Total cost of revenues 29,815 6,122 - 35,937 32,274 8,388 - 40,662
                 
Gross profit 81,769 32,528 - 114,297 81,750 39,613 - 121,363
 
Operating expenses:
Research and development 25,046 12,748 - 37,794 25,147 11,964 - 37,111
Sales and marketing 48,270 16,163 - 64,433 48,694 21,454 - 70,148
General and administrative 8,796 3,816 - 12,612 8,157 3,560 - 11,717
Goodwill amortization - - 1,526 1,526 - - 1,526 1,526
Total operating expenses 82,112 32,727 1,526 116,365 81,998 36,978 1,526 120,502
                 
Operating income (loss) (343) (199) (1,526) (2,068) (248) 2,635 (1,526) 861
                 
Interest income, net - - 2,140 2,140 - - 2,322 2,322
Other income, net - - 16 16 - - (510) (510)
Income (loss) before income taxes (343) (199) 630 88 (248) 2,635 286 2,673
Provision for income taxes - - - - - - - -
                 
Net income (loss) $ (343) $ (199) $ 630 $ 88 $ (248) $ 2,635 $ 286 $ 2,673

Netscape Communications Corporation
Condensed Consolidated Balance Sheets
 (In thousands)
  December 31, 1997 October 31, 1998
(Unaudited)
ASSETS
 
Current assets:
Cash and cash equivalents $ 55,172 $ 85,885
Short-term investments 129,426 91,598
Accounts receivable, net 153,191 164,892
Deferred tax assets 37,336 39,770
Other current assets 19,961 24,535
Total current assets 395,086 406,680
 
Property and equipment, net 131,093 144,886
Long-term investments 76,698 89,169
Other assets 29,943 26,099
  $ 632,820 $ 666,834
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $40,081 $50,214
Accrued compensation and related liabilities 23,193 26,977
Other accrued liabilities 34,106 35,980
Deferred revenues 106,170 148,582
Total current liabilities 203,550 261,753
 
Long-term obligations 215 420
 
Stockholders’ equity:
Common stock and additional paid-in capital 549,196 576,937
Deferred compensation (3,671) (1,306)
Accumulated deficit (119,201) (170,618)
Accumulated other comprehensive income (loss) 2,731 (352)
Total stockholders' equity 429,055 404,661
  $ 632,820 $ 666,834