A:

When Netscape had its public offering on August 10, 1995, a last minute decision prompted the company to raise the offering price to $28 per share. The move was considered bold for a company looking to sell five million shares on the strength of a single piece of software. Quickly, it was discovered that Netscape could have asked for more because the value of its shares jumped to more than $70 in first-day trading, which was a market value of nearly $2 billion. The Netscape IPO became the largest in Wall Street history at that time.

Netscape's Navigator was the most popular software for zooming around the emerging internet. In the early 1990s, everyday people checking out the world wide web for the first time usually did so with Netscape Navigator. However, the massive IPO in 1995 caught the attention of operating system (OS) giant Microsoft, and Navigator got its first real competitor. Unfortunately for Netscape, its competitor proved to be a gorilla. Microsoft had a highly profitable OS and cash reserves far beyond Netscape's. So Microsoft started bundling its own web browser, Internet Explorer, into its operating system as a freebie.

Netscape had used a similar strategy earlier in its competition with other start-up browsers by offering evaluation copies as a free download from its website. This time, however, Netscape was dead set against giving away its browser for free. Instead, Netscape responded by attempting to spruce up its browser with more features. In response, Microsoft added similar features to Internet Explorer. Netscape added more exclusive features to Navigator, and Internet Explorer reloaded with more competing features. This features arms race, nicknamed featuritis, made both browsers slower and more vulnerable. In addition, it split the internet into two worlds - one that displayed well in Navigator and one that displayed well in Internet Explorer.

In the end, Microsoft won, simply because everyone needed an OS and most people bought Windows. Consumers who bought personal computers ended up buying Windows, now the standard operating system, simultaneously. Consumers had the choice to use the faulty Internet Explorer that came with Windows or to pay additional money to purchase Navigator - now equally faulty and laboring under too many add-ons. Internet Explorer won out and Netscape was bought by AOL in 1998 and then slowly disassembled. Although Netscape Navigator has been discontinued, its spiritual progeny, Firefox, carries on the browser war with Internet Explorer. This time, both are free. (For more on this topic, read The 5 Most Feared Figures in Finance and Monopolies: Corporate Triumph and Treachery.)

This question was answered by Andrew Beattie.

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