Friday June 25 12:19 AM ET
Source: AOL, MicroWorkz in Talks
By DAVID E. KALISH AP Business Writer
NEW YORK (AP) - America Online Inc. (NYSE:AOL - news) is in talks with MicroWorkz Computer Corp., a maker of $200 personal computers, in a move to try to sell its Internet service to the millions of Americans who haven't bought computers because of the cost, a source close to the negotiations said.
The talks, while described as preliminary, could have important implications in the Microsoft Corp. (Nasdaq:MSFT - news) antitrust trial in Washington, as MicroWorkz's inexpensive desktop machines don't use Microsoft's Windows operating system.
In fact, as the last witness finished testifying Thursday, a news report about the talks was introduced as last-minute evidence in the case.
As part of its defense, Microsoft, which sells the operating system that runs 85 percent of the world's personal computers, has argued that AOL's $10 billion purchase of rival Netscape Communications Corp. illustrates that the high-tech industry is sufficiently robust that federal intervention isn't needed.
In one possible result of the talks, AOL could offer MicroWorkz computers at easily affordable prices or even give them away to people who agree to subscribe to its service. That could vastly expand AOL's subscriber base, currently at 17 million, and make AOL machines an important new rival to computers running on Windows.
AOL's service is currently available on Apple Macintosh machines, another non-Windows computer, but Apple only has about 10 percent of the personal computer market share, according to the research firm PC Data.
The AOL-MicroWorkz talks were first reported Thursday by the MSNBC Internet news service.
The source, who spoke on condition of anonymity, said AOL initiated the talks regarding MicroWorkz's inexpensive PCs as a way to try to sell its Internet service to the millions of Americans who haven't yet bought computers because of the expense. The negotiations come amid a major ''AOL Anywhere'' initiative to bring the online service to a range of computers and electronics gadgets.
Rick Latman, chief executive of MicroWorkz, said the company was talking with AOL about a potential cross-marketing arrangement, but declined to elaborate. AOL spokesman Jim Whitney would not comment.
Word of the negotiations comes two days after Seattle-based MicroWorkz introduced its iToaster computer at the PC Expo trade show in New York. The desktop computer uses a non-Windows operating system made by Be Inc., includes non-Microsoft word processing, spreadsheets and other programs, and easily jumps users to the Internet.
In addition to AOL possibly offering PCs to its subscribers, another scenario would involve AOL being prominently promoted in computers sold by MicroWorkz, aiming to entice users to sign up for its offering of information, news, chat and other services.
An AOL deal could help Microsoft bolster its argument that the Internet and new technologies represent a major threat to its software business.
An AOL agreement to offer PCs to its subscribers also could seem to contradict statements by an AOL executive in trial.
During the trial's final phase, Microsoft called as a hostile witness AOL executive David Colburn and questioned him about his company's plans to develop an ''AOL PC'' that won't use Microsoft's flagship Windows operating system.
Colburn testified that plans for ''building a PC-type functionality that really is an alternative to Windows are largely dead. I don't know of any current ones (plans) going on.''
Microsoft lawyer Michael Lacovara on Thursday noted Colburn's testimony and then showed the judge a news report about AOL's talks with Microworkz. U.S. District Judge Thomas Penfield Jackson raised his eyebrows and appeared to take notes.
''I can't say you haven't brought me current'' on industry developments, Jackson told Microsoft's lawyer.
Assistant U.S. Attorney Joel Klein insisted outside the courtroom that news of the discussions between AOL and Microworkz will not adversely affect the Justice Department's antitrust case.
''There's no dent in the case, that's clear,'' Klein said, noting that Microsoft's own economics expert testified this week that the nation's largest computer makers have no viable alternative to Windows.
''The Microsoft lawyers labored long and hard to try to invent a threat from AOL,'' said Stephen Houck of the New York attorney general's office, the lead lawyer for the 19 states suing Microsoft with the Justice Department.
|
