Piling pressure on the already-vexed Microsoft Corp, a well-timed leak to the Wall Street Journal reveals that Netscape Communications Corp and America Online Inc are deep into talks about possible partnership deals, including the possible swapping out of Microsoft Internet Explorer for Netscape’s browser within the AOL service. The two companies are already pretty close, with Netscape using AOL Digital Cities to provide all the local content on its Netcenter portal: Netscape including AOL Instant Messenger in Communicator; and AOL NetFind being included in Netscape’s search engine rotations. This is not the first time the two have been mentioned as flirting with each other. Way back in February 1996 merger talks between the two were reported, at the time painting a link-up between the two as effectively enabling them to control the online market, shutting out Microsoft, which had only just discovered the net at that point. Things changed pretty quickly and in March 1996 AOL chose IE as its exclusive browser, dumping Netscape. The Microsoft antitrust trial, which could affect a lot of relationships Microsoft has in the industry, seems to have been part of the reason AOL has been rethinking its tie-in to IE. A couple of weeks ago AOL senior VP David Colburn gave evidence as a government witness, saying that as part of the deal that gave AOL an icon on the Windows 95 desktop, it was told to make it difficult to get access to Netscape’s browser. His testimony also confirmed that talks with Netscape started in late 1995. AOL’s contract with Microsoft is up on January 1 1999 and thus it is reasonable for it to be pursuing its options with just six weeks left. It is also highly likely that AOL is, has done, or is about to, have similar talks with Microsoft as Redmond would not like to lose AOL to its rival now, even though Microsoft has recently been stepping up its efforts with its online service, MSN, to rivalAOL. According to the story in the Journal, the talks also involve the possibility of AOL taking a stake in Netscape, or it may just turn out to be some sort of joint marketing arrangement between the two. Whatever it is, the leak was good for a jump in Netscape’s share price, which despite its best efforts with Netcenter, has not managed to secure itself to the coattails of the other major online service providers. When AOL and Yahoo shares go up, Netscape, like a disobedient dog, usually fails to respond. Netscape closed up $10.00, or 34.2% at $39.25 on 32.1 million shares traded – the most active in terms of share volume on Nasdaq Amex. AOL closed up $7.875, or 10.5% at $83.25.
