Analysts: AOL, Microsoft wars have just begun

Reports suggest contract negotiations are inching along between the two companies over the inclusion of AOL's installation icon in Microsoft's upcoming Windows XP operating system. The haggling between the companies could signal the start of friction that could lead to a major war between the two Internet heavyweights. Both hope to control new platforms such as media players and instant messaging services, according to research company Gartner.

The two may prove unlikely bedfellows, says Gartner Internet strategies analyst David Smith in a recent report. Each company's plans to dominate new technologies may lead them into more complex deals, touch-and-go negotiations, and even courtrooms, he says.

The two companies have been in heated talks over the extension of a deal that gives AOL placement on the Windows operating system desktop in exchange for AOL's exclusive use of Microsoft's Internet Explorer IE browser over AOL's own Netscape browser. Although these should have been relatively simple negotiations, Smith says, the talks almost came to a screeching halt in early June. That's when the companies reportedly sparred over Microsoft's plans to integrate its new Windows Messenger service into Windows XP, to the exclusion of AOL's dominant AOL Instant Messenger.

The negotiations even took a swipe at innocent bystander RealNetworks when rumours that Microsoft was giving AOL the hard sell to adopt its Windows Media Player in place of RealNetworks' RealPlayer sent RealNetworks' stock tumbling 20 per cent in late May.

Hailstorm brouhaha

All the excitement over AOL's installation and AIM is nothing compared to the upcoming battles between the Internet titans, Gartner analysts say. Microsoft's October release of Windows XP, coupled with its HailStorm initiative, will place the software company in the pay-as-you-go Internet territory that AOL clearly wants to tread. This will leave the companies fighting for future customers as they move to stake claim to dominant positions in the nascent IM and media player markets.

Microsoft plans to incorporate its HailStorm services in Windows XP. The company says HailStorm will establish a secure online identity for consumers, which will support for-pay Web services. Analysts predict that HailStorm will reduce demand for competing products from companies like AOL, RealNetworks, and Yahoo.

Instant messaging battle

On the IM front, Microsoft's new Messenger reaches beyond traditional text-based messaging to incorporate voice, video, and user-shared applications.

Gartner analysts believe that Microsoft is hoping its new and improved IM service will force AOL's hand--causing the company to open up its IM service to interoperability. So far the company has been reluctant to do this. Interoperability would benefit users, the analysts say, but would take a bite out of AOL's marketshare.

Responding to speculation over the companies' sticky relationship, an AOL spokesman said Tuesday that "AOL and Microsoft are both partners and competitors and nothing in the talks (will) change that."

No one from Microsoft was available for comment Tuesday morning.

However, negotiations between the Internet giants shake out, consumers can hope that the fierce competition will at least spur more options and cheaper services in the end.

Join the PC World newsletter!

Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection
Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Scarlet Pruitt

PC World
Show Comments

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Matthew Stivala

HP OfficeJet 250 Mobile Printer

The HP OfficeJet 250 Mobile Printer is a great device that fits perfectly into my fast paced and mobile lifestyle. My first impression of the printer itself was how incredibly compact and sleek the device was.

Armand Abogado

HP OfficeJet 250 Mobile Printer

Wireless printing from my iPhone was also a handy feature, the whole experience was quick and seamless with no setup requirements - accessed through the default iOS printing menu options.

Azadeh Williams

HP OfficeJet Pro 8730

A smarter way to print for busy small business owners, combining speedy printing with scanning and copying, making it easier to produce high quality documents and images at a touch of a button.

Andrew Grant

HP OfficeJet Pro 8730

I've had a multifunction printer in the office going on 10 years now. It was a neat bit of kit back in the day -- print, copy, scan, fax -- when printing over WiFi felt a bit like magic. It’s seen better days though and an upgrade’s well overdue. This HP OfficeJet Pro 8730 looks like it ticks all the same boxes: print, copy, scan, and fax. (Really? Does anyone fax anything any more? I guess it's good to know the facility’s there, just in case.) Printing over WiFi is more-or- less standard these days.

Ed Dawson

HP OfficeJet Pro 8730

As a freelance writer who is always on the go, I like my technology to be both efficient and effective so I can do my job well. The HP OfficeJet Pro 8730 Inkjet Printer ticks all the boxes in terms of form factor, performance and user interface.

Michael Hargreaves

Windows 10 for Business / Dell XPS 13

I’d happily recommend this touchscreen laptop and Windows 10 as a great way to get serious work done at a desk or on the road.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?