ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Wednesday, March 13, 1996 TAG: 9603140033
SECTION: BUSINESS PAGE: B-7 EDITION: METRO
DATELINE: NEW YORK
SOURCE: Associated Press
ENDING A YEAR OF ACRIMONY, the deal gives America Online exposure on virtually every new personal computer. In return, it will use the software giant's Web "browser" program.
America Online Inc. and Microsoft Corp. put aside a year of acrimony Tuesday with an alliance that may broadly affect the future of on-line services and software development.
The deal gives America Online exposure on virtually every new personal computer, and Microsoft a boost in its struggle against Netscape Communications Corp. to influence rapid changes in software development.
It ends months of bitterness between the companies over Microsoft's integration of its own on-line service with its core product, the Windows 95 operating system that runs basic functions of most personal computers.
The Justice Department has kept alive an antitrust investigation of Microsoft because of complaints by America Online and other on-line firms about the connection between Windows 95 and the Microsoft Network on-line service. The Justice Department said the probe would continue.
The deal also caps a week of arrangements by America Online with Apple Computer Inc., AT&T Corp. and Netscape that may lower its costs and expand its base of 5 million subscribers, the biggest of any on-line service.
``They help clear the deck to focus on the real issue, which is what will AOL's content strength be in two to three years,'' said Bill Bluestein, analyst at Forrester Research in Cambridge, Mass.
AOL and other on-line firms are adapting themselves economically and technically because of the growing appeal of the Internet as a common space for exchanging data.
America Online's stock closed up $7.121/2 to $55.50, a 15 percent jump. Microsoft was down 75 cents to $95.75, and Netscape was down $1 to $45.25. All are traded on the Nasdaq stock market.
In the latest deal, Microsoft agreed to make America Online's access software part of Windows 95 when it is revised this summer. While America Online's software already appeared on many new PCs, it paid manufacturers to put it there and may now save significant marketing costs.
In return, America Online will use Microsoft's Explorer ``browser'' program as the principal way its subscribers access information on the World Wide Web and similarly designed networks inside companies.
``Microsoft will become our primary technology partner in the Internet space,'' said Steve Case, chief executive officer of America Online.
That's important to Microsoft because Explorer is far behind Netscape's Navigator program as the Web gateway most people use. And programmers who design information for the Web decide what design tools to buy based on the reach of those browsers.
Netscape has gained more clout among software developers who are modifying programs and data to be accessible on the Web or internal networks that use a similar technical design.
``Microsoft gains some legitimacy for its browser as far as market share is concerned,'' said Scott Winkler, analyst at Gartner Group, a technology advisory firm in Stamford, Conn. ``In an environment where they were having difficulty competing, they've now got a story to stand on.''
Indeed, Microsoft took full advantage of the alliance by announcing it at the start of a conference in San Francisco it is holding for 5,000 software programmers it hopes will buy its Internet-related design tools.
``We're not in this to be a distant second. We're doing what it takes,'' Paul Maritz, the group vice president in charge of Microsoft's operating systems and Internet programs.
But Netscape is still the leader with its browser used by nearly 9 out of 10 people who surf the Web. It latest release, Navigator 2.0, has many features that Microsoft won't offer until this summer.
AOL subscribers will still have the ability to use Netscape's browser, but they will have to download it separately, just as they do now.
``What AOL is doing is offering customers a choice,'' said Mike Homer, vice president of marketing for Netscape. He attributed America Online's preference to Microsoft's browser as driven by the appeal of being part of Windows 95.
The Microsoft-AOL arrangement is not exclusive, however. Microsoft may eventually fold other on-line service software into Windows 95, chairman Bill Gates said.
LENGTH: Medium: 81 linesby CNB