Microsoft Hooks Up With America Online / Explorer browser to be built into AOL's software

Chronicle Front Page
The Gate

Wednesday, March 13, 1996 · Page B1
© 1996 San Francisco Chronicle

Microsoft Hooks Up With America Online
Explorer browser to be built into AOL's software

David Einstein, Chronicle Staff Writer

Momentum in the Internet war between Netscape Communications and Microsoft is changing more often than the lead in an NBA shootout.

One day after Mountain View- based Netscape signed an alliance with America Online, Microsoft yesterday unveiled an even better deal with AOL. On Monday, AOL agreed to enable its 5 million subscribers to access the World Wide Web using Netscape Navigator -- the leading Web browser with more than three-fourths of the global market.

Yesterday, however, AOL dropped a bombshell, saying it would build Microsoft's Internet Explorer browser directly into the software used to access the AOL service. That will give Microsoft a decided advantage over Netscape among AOL members.

In return, Microsoft will provide personal computer users with direct access to AOL by putting an icon for the service on the startup screen of Windows 95. In effect, that will make AOL easily available to everyone who buys a PC, since most new systems come preloaded with Windows 95.

By nailing down agreements with both Netscape and Microsoft, Vienna, Va.-based AOL bolstered the effort to integrate its service with the World Wide Web, which can be accessed without an online service. Analysts have called the Internet a major threat to traditional online services.

Shares of AOL, which gained 4 3/8 after the Netscape announcement on Monday, tacked on an additional 7 1/8 yesterday to close at 55 1/2. Netscape stock fell 1 to 45 1/4. Microsoft fell 3/4 to 95 3/4.

Yesterday's agreement was a stunner in part because AOL's chief executive, Steve Case, has been an outspoken critic of Microsoft. He has accused the company of trying to monopolize the online industry by using Windows 95 to provide direct access to Microsoft's own online service, the Microsoft Network.

Ironically, the deal with AOL could hurt Microsoft's ability to market MSN. But Microsoft has said it plans to transform the fledgling service into an Internet-based product, which would not compete directly against AOL.

``What this deal tells us is that Microsoft is not as concerned about the success of MSN as about gaining browser share,'' said analyst Frank Michnoff of Donaldson, Lufkin & Jenrette in New York.

Landing the agreement with AOL could be a significant shot in the arm for Microsoft in its uphill fight against Netscape. Microsoft was a late entry into the Internet frenzy, but it has been catching up rapidly since early December, when Chairman Bill Gates made the Net a primary focus for the Redmond, Wash.-based company. Gates called the deal with AOL ``a tremendous win-win for consumers and the industry,'' adding, ``Now, the two leading browsers will compete head-to-head to offer customers innovative Internet technology.'' In an effort to neutralize Netscape's technology leadership, Microsoft yesterday said it finally has licensed Java, the hot software used to create multimedia applications for the Web. Netscape was an early champion of Java.

Chronicle Search
Chronicle Front Page
The Gate Home Page
© The Chronicle Publishing Company