May 07 2001

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Over the last few weeks we've seen several reports that America Online is preparing to drop Internet Explorer from its client software by the end of this year. Despite a pending merger with Netscape [see Nov. 23, 1998], AOL chose IE as its default browser in 1998 in exchange for a default icon on the Windows desktop. The 1998 contract expired on January 1 of this year and has not been renewed, with talks to extend it going nowhere. Now AOL beta testers are reporting the next CompuServe client under development is based around components of Mozilla, the open source browser developed from what once was Netscape. Rumors say the CompuServe and AOL services are being combined under a single user interface, so it's very likely that AOL 7.0 will also use a client based on components of Mozilla. That takes AOL's 30 million customers away from Internet Explorer and back to Netscape/Mozilla, a serious shift in browser market share.
So why is AOL finally considering its own software some two years after purchasing it? From what we can tell, AOL no longer feels that an icon on the Windows desktop is worth the abuse it takes from Microsoft in exchange. With Windows XP eliminating default desktop icons to "reduce clutter" and Microsoft preparing to integrate MSN and .NET with Windows and MSN Messenger in a deliberate action against AOL, all deals are off. The world's largest Internet service will probably launch Linux versions of its software in the near future as a shot across Microsoft's bow, followed by long-promised handheld and TV top services based on open source software. Recess just ended and AOL is finally playing for keeps - Microsoft may soon get a taste of its own medicine.
ALSO SEE: BetaNews, The Register, CNET

InterTrust, a small California company that develops digital rights management software, has sued Microsoft for patent infringement. According to InterTrust, a patent it filed for in February is being violated in Microsoft's MediaPlayer 8 software, which is being tied into Windows XP. The lawsuit asks courts for monetary damages and an injunction to stop Microsoft from distributing MediaPlayer rights management software with Windows XP. If successful the case could stop Microsoft from selling WinXP or at least push the release date back a few months. When asked about the suit, Microsoft's response was "it's unfortunate that InterTrust has chosen to resort to the courts rather than compete in the marketplace." (Not that Microsoft knows anything about "competing in the marketplace" either.)
ALSO SEE: CNET, BetaNews

A five-year deal between the Qwest telecom company and Microsoft was announced on April 26th. The arrangement calls for Qwest to drop its Qwest.net dialup Internet service and instead offer MSN Internet Access and MSN DSL service to Qwest.net's 500,000 existing customers. Financial details of the arrangement were not released, but we do know Qwest will purchase more than $100 million of 'advertising' on MSN web sites and both companies will promote the service to existing customers. Microsoft purchased 1.33% of Qwest for $200 million back in 1998 [see Dec. 21, 1998] shortly before Qwest merged with US West, another company Microsoft had a small investment in. Qwest's combined service area now covers 14 states and 12 million homes - all potential MSN customers under the new arrangement.
ALSO SEE: CNET, SJ Mercury

Long jealous of the margins competitors such as IBM and Oracle make from their large service businesses, Microsoft has combined its 'Product Support Services' and 'Consulting Services' divisions into one massive unit providing technical support and IT planning to corporate customers. The combined Worldwide Services group will contain some 13,300 full-time employees overseen by Robert McDowell, the current Support Services supervisor and one of Microsoft's oldest employees. Beyond supporting and planning for its own products, Microsoft Worldwide Services will sell software and hardware packages from other companies - but since the whole point of this is to increase acceptance of Windows 2000, we expect they won't be setting up much Unix.
ALSO SEE: TechWeb, WinInfo, The Standard

Hopefully the combined services division will do a better job than Microsoft's current product support team, which is responsible for sending the FunLove virus to 26 large corporate partners last month over its Premier and Gold support network. A MS executive said an outside company responsible for hosting the network connected it to an infected server, contaminating 170 hotfix files distributed to 26 unnamed corporate customers on the 19th and 20th of April. Microsoft said the virus should pose no risk to anyone since it was added to most viral protection software over a year ago, but the customers involved are being contacted and warned anyway. A spokesman said the potentially devastating virus didn't reach Microsoft's consumer software update network, where it could have infected millions of home, small business, and educational Windows users, most of whom don't use antiviral software.
ALSO SEE: CNET, The Register

Before Windows 2000 shipped, Microsoft promised to continue supporting NT 4 by "providing regular, timely releases of Service Packs" for several more years. That promise is now deader than NT 3.5, with the company officially announcing NT 4 Service Pack 7 has been canceled. Microsoft said the plans changed because not enough serious NT issues have shown up since SP6 (despite the dozens of patches released since then), and most customers who still use NT are happy without having to install another update. However, the completed SP7 has been spotted in the hands of several important partners - particularly NASA, which uses NT on the space station. Less important Microsoft customers who don't represent millions of dollars in annual sales will have to make do with NT Service Pack 6 and the pile of hotfix patches available for it. That encourages them to replace NT with Win2K - which is exactly what Microsoft wants anyway.
ALSO SEE: WinInfo, The Register

As the Internet industry settles and companies without profits shut down, Microsoft is taking advantage of its partners to acquire well-known but unprofitable brand names. One such partner is NBC, announcing a few weeks ago that its CNBC.com financial news site is merging with Microsoft's MSN MoneyCentral to become 'CNBC MoneyCentral' sometime this summer. Microsoft and NBC both claim the decision is a strategic move to combine CNBC TV's experience and promotional skill with Microsoft's financial backing, but the devil is in the details - Microsoft's Consumer Financial Products Group manager will have control over site operations, most current CNBC.com employees will lose their jobs, and the site will be part of MSN. So the move isn't strategic so much as desperate - NBC's Internet operations have lost massive amounts of money (which Microsoft happens to have) and Microsoft needed a name brand to slap on its unpopular finance site.
ALSO SEE: CNET, TechWeb, WinInfo

The European Union's antitrust unit has dropped one of two ongoing investigations into Microsoft's business practices. The dead case was centered around Microsoft's investments in nearly every European telecom company (United Pan-Europe, Deutsche Telekom, Cable & Wireless, Telewest, TV Cabo, and NTL Limited) and their agreements to use Microsoft's Interactive TV software. To end the investigation Microsoft agreed to modify its contracts with several of the companies, a mostly symbolic move that nonetheless satisfied EU prosecutors. The antitrust division is moving forward with its other investigation into Windows 2000, and has hinted other cases may be developing soon. But that doesn't do much to help the millions of consumers who could still be forced to use Microsoft TV products.
ALSO SEE: Wired News, WinInfo

A major flaw has already been discovered in Internet Security and Acceleration Server, the firewall and proxy software introduced by Microsoft in February [see Feb. 26, 2001]. Apparently the software has a critical flaw that causes a Denial of Service when anyone attempts to access an unusually long Web address through it. The problem works from either direction, when someone outside the network attempts to retrieve a URL from inside, or when someone inside tries to access a URL on the general Internet. Toronto-based SecureXpert Labs discovered the "glaring" problem in late March, giving Microsoft better than three weeks to develop a patch before making the results public.
ALSO SEE: InfoWorld, CNET

Microsoft has made a deal with Staples, ensuring that customers of the office store chain will soon be subjected to the same heavy-handed promotion of MSN that RadioShack customers currently endure. Financial terms of the arrangement were not revealed, but previous deals with similar retail chains cost Microsoft more than $100 million.
Cascade Investment LLC, an investment group owned by Bill Gates, recently filed documents with the government showing it owns 7.8% of Liberty Satellite, the wireless communications company controlled by AT&T. (The filing didn't specify when Cascade obtained the stock or how much it cost.) Gates also has a significant stake in the Teledesic sattelite company, and Microsoft is a rumored bidder for GM's DirecTV satellite network.

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