Startup could allow ISPs to steal space on Windows

A startup with a key patent that gives it control over space on the Windows-dominated desktop says it has developed a product that will allow Microsoft competitors to squeeze their way on to PCs, just as AOL Time Warner Inc. reportedly plans to do through deals with PC makers.

XSides, a Seattle-based startup, has built an application that will allow potential partners such as AOL Time Warner or other ISPs (Internet service providers) to secure a space on a user's PC without facing legal or competitive pressure from Microsoft. The technology is effectively a start menu that runs independent of the operating system.

XSides' technology expands the space around the edges of the screen of any operating system, whether it's Linux, Unix or Windows. The company is also developing versions of the technology for set-top boxes and PDAs (Personal Digital Assistants). What it creates is a display area around the operating system interface, resizing Windows, for instance, to a new dimension -- a function that is built into the operating system.

The technology comes with good timing. Published reports Thursday suggested that AOL Time Warner is dealing with PC manufacturers to rent space on desktops running the Windows operating system, the Washington Post reported.

Media and technology giant AOL Time Warner is taking advantage of a recent concession by Microsoft that allows computer manufacturers more flexibility in configuring the desktop, including allowing third-party icons and applications to show up when a user turns on a computer. AOL Time Warner did not respond to repeated calls for comment.

Microsoft's Windows operating system, which is used on more than 90 percent of the world's PCs, has traditionally controlled the real estate on the desktop through relationships with computer manufacturers. AOL Time Warner reportedly is asking PC manufacturers to include icons, pop-up notices and other images on desktops. The Post reported that AOL will pay manufacturers US$35 per ever customer that signs up for AOL's Internet service.

AOL Time Warner has a range of technological options for finding its way to the desktop. One possibility could be with the application xSides has built.

"The business model for a PC suddenly starts to look a little different" with this technology, said Chris Le Tocq, principal analyst with Guernsey Research. "It provides people a way to supply a desktop platform that is independent of Microsoft -- really independent in the sense that a PC manufacturer or ISP can essentially have the desktop be exactly what they want it to be."

While the xSides technology does break down the entry barrier for Microsoft competitors to win prominent space on the desktop, it raises a sticky issue for manufacturers who hold contracts with Microsoft.

"The question is, is (xSides) protected enough that the OEMs (original equipment manufacturers) will risk Microsoft's wrath using it," Le Tocq said.

The same question is being asked of AOL Time Warner's reported plans. The company could, however, have the market power to back PC makers who alter the Windows environment. The Washington Post suggested that AOL Time Warner could be planning on using low-cost PC maker eMachines Inc. as its first distributor. AOL Time Warner is an investor in eMachines.

Still, xSides skirts potential conflicts with Microsoft, avoiding legal pitfalls, according to XSides' Chairman and Chief Executive Officer Robert Steinberg, a former lawyer. Besides employing a high-powered antitrust attorney, xSides' technology is protected by the latest Appeals Court decision in the government's ongoing antitrust case against Microsoft. The software is in a class known as "middleware."

"It's a protected class of software," Steinberg said, citing the recent Appeals Court decision. "We don't rely on a court remedy or a settlement. XSides provides a technological remedy right now."

Middleware is a higher level of software that exposes a set of APIs (application programming interfaces) that are independent of the operating system. Web browsers, for instance, are middleware. While xSides is not classified as an operating system because it doesn't have a "kernel" like Windows or Linux, it can run on a computer and show up on the display without ever interacting with the operating system.

The Appeals Court addressed the issue of middleware at length in its opinion because "it was looking to protect software that could threaten the monopoly that Microsoft enjoys today," said Sean Pak, vice president of marketing at xSides. "The reason why the court focused on middleware is because it has the potential to draw both users and application developers away from the installed operating system."

Originally called Ark Interface, xSides was spun out of Packard Bell, now a subsidiary of NEC Corp., in 1997. For the next three years, xSides developed the start menu technology, partly with the help of two former Microsoft developers, one of whom, David Nason, is the company's chief technology officer.

In January 2000, the company won its first patent for its core technology, which effectively takes control over the user's desktop, creating an alternate display. The company has 32 more patents pending.

So far, seven companies have licensed xSides technology, while only two have gone public with it. Broadcom Corp., a customer and investor, is developing multiple technologies including one to create space on the television through the set-top box. Another partner, Qwest Communications International Inc. uses xSides technology to deploy its online directory on a PC desktop.

Executives from xSides would not comment on any other partners or whether AOL Time Warner is one of them. The company does expect to announce new applications from partner companies by the end of the year, Pak said, but would not say if any of those will come before the Oct. 25 release of Windows XP.

The technology does make way for AOL Time Warner or other companies to secure space on the coveted start-up screen, according to Dan Kusnetzky, an analyst with International Data Corp. While he hasn't heard much from the company since it first started pitching its technology a year ago, he agreed that Microsoft's latest concession does open up the field for xSides' technology.

"That's just about the only way you can get on the desktop," he said of xSides technology.

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Matt Berger

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