America Online and Netscape shares surged yesterday, amid rumours that they may get into bed together, leaving arch rival Microsoft out in the cold.
Under discussion are a number of areas, including stronger co-marketing agreements to loading Netscape's Internet browser onto AOL's online service alongside, or in place of Microsoft software. In return AOL could make an equity investment in Netscape, claim industry sources.
With 14 million members, AOL is the world?s largest online service. Microsoft?s Internet Explorer has been AOL?s adopted browser for customers since 1996.
A teaming between the companies could influence the online industry and the browser war between Microsoft and Netscape, according to analysts, possibly swinging the market to Netscape?s favour.
If AOL and Netscape decide to have a relationship, it will not be the first time. In 1996 AOL opted to include Netscape in every copy of its access software. It changed its mind when Microsoft offered the online service provider a prime position on the Windows desktop. This conflict is at the centre of the US government's ongoing antitrust suit against Microsoft.
AOL's Internet browser deal allows it to end its exclusive arrangement with Microsoft on 1 January. Analysts believe AOL may be shopping around for another browser, given that Microsoft?s Internet directories and city guides are now in direct competition with the online service provider.
During the first half of this year Netscape?s US browser market share fell to 41.5 per cent from 50.5 per cent at the end of 1997, according to market research company IDC. Meanwhile Microsoft?s Internet Explorer share went up to 43.8 per cent. This was bolstered by a deal with AOL whereby Explorer is bundled with AOL software.
Neither companies would comment on the tie-up speculation.
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