Microsoft, eBay form e-commerce alliance

The software maker and the online auctioneer enter a strategic deal to support and incorporate each other's e-commerce applications and expand their Web presence.

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Microsoft and eBay on Monday said they have linked arms to support each other's technologies, aiming to expand their Internet footprints.

As part of the new partnership, the software behemoth and the giant online auctioneer will cooperate on several fronts. eBay plans to support Microsoft's software-as-a-service plan, .Net, and other technology including the Windows 2000 server and Internet-authentication service Microsoft Passport. Microsoft, in turn, will integrate eBay's proprietary online marketplace technology into a number of its Internet properties including Carpoint.com, WebTV, small-business hub bCentral and some Web sites of its MSN Internet service.

Financial terms of the alliance were not disclosed.

The move underlines both companies' efforts to bring their Internet technologies and services to the masses.

Redmond, Wash.-based Microsoft last year unveiled its Web services strategy, .Net, and since then has been busy touting what may be the most important strategic shift in its history, from selling software to providing services. The company has been battling rivals Oracle, Sun Microsystems and Hewlett-Packard on the services front and has made .Net a primary focus.

eBay, meanwhile, has pushed the use of its online marketplace technology. Last November, the San Jose, Calif.-based company introduced its API (application programming interface) and developers program--an initiative to bring its flagship technology to Web sites and programmers as it seeks to become the de facto operations system for Internet auctions.

Meta Group says that at the heart of the Microsoft-eBay alliance is an understanding by both companies that the Web is moving to a new model.

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An API is a series of functions that software programs can use to make an operating system, such as Microsoft Windows, perform tasks including opening and closing windows and files. Use of APIs is thought to assist programmers in setting up systems without having to do the dirty work of coding basic features from scratch.

Asked if the deal with Microsoft would spell the end of technology and distribution deals that eBay has in place with Sun Microsystems and AOL Time Warner, eBay CEO Meg Whitman emphasized that her company is not into signing exclusive deals.

"eBay is all about multiple partners," Whitman told press and analysts on a Monday morning conference call.

She said that Sun would continue to supply eBay with back-end servers to run its database and that the AOL-eBay distribution agreement would remain in place.

eBay made Sun its premiere provider of servers, software, storage and services in May 2000. In 1999, eBay launched a co-branded site with AOL across all of the Internet giant's categories.

Microsoft CEO Steve Ballmer, for his part, emphasized the cooperation between the two companies, especially in their online properties. Ballmer added that Microsoft also plans to strengthen links between eBay and Windows XP, its next desktop Windows product, due out later this year.

"When you're logged into Windows XP, you'll be logged into eBay," said Ballmer, playing up the .Net software-as-a-service component of Microsoft's forthcoming Windows client.

Under Monday's agreement, eBay's online marketplace technology will be offered as a SOAP-based XML Web service through .Net. SOAP, or Simple Object Access Protocol, is an XML-based protocol for e-commerce transactions, based on technology developed by Microsoft, IBM and others. XML (Extensible Markup Language) is a popular Web standard for businesses to exchange information with each other via the Web.

Microsoft said its .Net technology will help make eBay's flagship online trading engine accessible to a great number of developers and fuel the adoption of the Internet auctioneer's services by consumers through a wide variety of devices and applications, not just a browser.

The software maker said it intends to use eBay's XML-based service to integrate the trading services of eBay's online marketplace into a number of its own Web properties. The combination of the services is scheduled to debut later this year and will be available in a number of MSN's international markets. In addition, eBay's online trading technology will be available for small businesses to use via Microsoft's bCentral Internet network.

As part of the agreement, Microsoft and eBay said they intend to jointly promote the new services on their respective Web sites. The two companies also plan to collaborate on a series of other projects centered on Web services; eBay, for instance, intends to take a hand in the forthcoming Windows XP operating system.

The auctioneer already uses Microsoft servers for the "front end" of its Web site--the array of servers that send Web pages to the multitudes of Web browsers. Sun servers are used for the company's back-end computers, though, which handle the e-commerce heavy lifting.

Monday's deal means eBay will upgrade its current front-end Windows NT servers to Windows 2000 and buy more servers for that task, eBay spokesman Kevin Pursglove said.

News.com's Stephen Shankland and staff writer Mary Jo Foley contributed to this report.