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AOL-Netscape and the browser wars

Microsoft stands to lose its exclusive spot as the browser provider for the online giant just as a new study shows IE dominating Navigator, with AOL's help.

The possible buyout of Netscape Communications by America Online is threatening to throw a monkey wrench in the machinery of the browser war.

Yet another study has shown Microsoft's Internet Explorer pulling ahead of rival Netscape Commincations' Navigator. However, the study lumps together Microsoft's product with America Online's branded version of IE. With AOL angling to buy Netscape, the numbers released today could turn out to be one of the last snapshots of the pre-buyout browser battle.

The statistics, released by market research firm AdKnowledge, show that this month, IE's market share surpassed that of Navigator for the first time. Other research firms have already shown IE pulling ahead, if AOL's branded version is included.

The big question for Microsoft on the browser front is whether AOL, See special coverage: AOL to buy Netscape should it buy Netscape, would switch from Internet Explorer to Navigator. While many analysts assume that this would be the case, Newsweek, citing "people familiar with the talks," has reported that AOL would keep IE on as the default browser. AOL declined comment.

AOL's deal with Microsoft to use IE runs through mid-2001. But AOL has the option to back out of that agreement as early as January 1, 1999.

Last week, Netscape and AOL were said to be in talks over possibly embedding Navigator into the online giant's service, possibly ending Microsoft's exclusive spot as the sole browser provider for AOL's 14 million users.

According to the AdKnowledge study, users of both IE and AOL-branded IE in November accounted for 49.5 percent of the market, up from 36 percent in January. Navigator users accounted for 45 percent, down from 62 percent in January.

While AOL may have been primarily interested in acquiring Netscape's portal and its users, the Navigator browser is an attractive bonus in the deal, particularly for the direction Netscape has been taking in tying it to Netcenter.

"AOL is very adept at the mechanics of a proprietary client, or one that is tightly integrated with the server," said Forrester Research analyst Eric Brown. "That's increasingly what Navigator and Netcenter are about. AOL liked it, and they're buying it."

But with the recently launched beta of Internet Explorer version 5.0, Microsoft has demonstrated a move in the same direction, albeit with a more site-specific approach. IE 5 provides a frame in which portals and other content providers can stay onscreen while the user surfs the Web.

Dubbed the "Internet Explorer Web Accessories" initiative, the separate content pane has attracted the participation of Alexa Internet, CNET content partner Bloomberg Financial Markets, the New York Times online edition, and Microsoft's own MSN portal site.

Web Accessories could partially explain a decision by AOL to hold onto IE, though analysts stress that such a scenario is unlikely.

Complicating the browsers' future is Sun Microsystems' involvement in the deal. One possible scenario would have Sun managing the software side of Netscape's business--both the client and the server products--while AOL took over the media wing--i.e., Netcenter.

"A logical structure would have AOL retaining veto power related to the client, but all the software would have one home, and that's with Sun," said Jupiter Communications analyst Adam Schoenfeld. "That's probably what's holding up the deal. Sun is notoriously careful with deals."

Schoenfeld called the deal, should one be approved, a big win for Navigator against IE.

"AOL controls roughly 50 percent of the consumer interactive market," Schoenfeld noted. "That would almost set a floor for Navigator. Sure, some people would change the default, and some would have both, but still, that's a pretty powerful base. That counteracts the Windows advantage."

Sun's interest in the deal is heightened by Navigator's role in implementing Sun's Java programming language. While Netscape abandoned formal efforts to create Javagator, a 100 percent Java client, the leading browsers remain perhaps the most important and widely used Java implementations on the market.

Microsoft recently suffered a legal setback regarding its implementation of Java, and subsequently has decided to withdraw some support for the technology in some versions of the browser.

Navigator, however, has had its share of difficulties with Java, and Sun's ownership of the client could be good news for the technology.

"One of the reasons Java crashes the browser so much is that the two companies didn't get their acts together," Schoenfeld said. "Maybe we would have seen the Javagator if Sun were doing it. It was unnatural to have the most visible implementation of Java residing in a different home than the programming language."