Microsoft: AOL 'Completely Mismanaged' Netscape
Friday January 25 01:51 PM EST
By Lisa Gill, www.NewsFactor.com
When AOL (NYSE: AOL - news) filed suit Tuesday on behalf of its Netscape subsidiary against software maker Microsoft (Nasdaq: MSFT - news), speculation about AOL's motive, timing and desired monetary settlement -- as much as US$12 billion -- flew fast and furious.
Now, many analysts believe the lawsuit has less to do with reviving the browser wars than it does with AOL's desire for monetary awards to offset its failed Netscape purchase.
Carl Howe, research director at Forrester, told NewsFactor that he does not think AOL's agenda is to return Netscape to its former glory. Rather, the company wants to recoup monetary damages from Microsoft and prevent further anticompetitive behavior on the part of the software maker.
"I really think this is AOL saying, 'We bought [Netscape] with the expectation there would be some value there, and we have a responsibility to shareholders to make as much money on the assets we buy as we can,'" said Howe.
"They're trying to monetize the guilty verdict," he explained.
Hoping for Relief
AOL General Counsel Randall J. Boe charged in a statement that the Redmond, Washington-based software giant "thwarted competition, violated the antitrust laws and illegally preserved its monopoly at Netscape's expense."
Netscape also contended that its suit is a "logical extension" of both the district court and court of appeals findings in Microsoft's federal antitrust case. The company said it hopes its civil lawsuit will spur "injunctive relief that will help restore competition on the computer desktop."
Microsoft Disappointed
Microsoft spokesman Jim Desler told NewsFactor that the company is "disappointed" with the AOL lawsuit and finds it "not in the best interest of consumers or the nation."
"AOL has proven over the years ... their intent to wage legal and political battles against Microsoft rather than face off in the marketplace," Desler said.
Desler also charged AOL with having "completely mismanaged" Netscape since its acquisition of the company in 1999.
"Even after the purchase of Netscape, AOL continued to use Microsoft's Internet browser, and in the meantime has done very little to improve its own browser product in order to stay competitive," said Desler.
Browser Wars Dead
One reason that analysts point to AOL's desire for monetary relief is a belief that it is unlikely that any renewed browser competition could result from a lawsuit.
Analysts note that with Internet Explorer's nearly 90 percent penetration, consumer behavior is not expected to change -- especially if users would be required open their pocketbooks in order to make a switch.
Roger Kay, director of client computing at research firm IDC, told NewsFactor he believes that punitive damages and a desire to rein in Microsoft motivated AOL to file the lawsuit.
"The company may not have had much of a future, but all of its prospects ended almost instantly [when] Internet Explorer was bundled into Windows," Kay said.
Peter Kastner, chief research officer at Aberdeen Group, told NewsFactor that he also does not believe the AOL lawsuit is intended to draw Internet users back to Netscape.
"Netscape gained tremendous market share in the mid-'90s by having 'best of breed' in new technology," Kastner explained. "Since that time, for a variety of reasons, including competition by Microsoft, people have switched to Internet Explorer to the tune of 90 percent."
Cash Won't Help
Kastner noted that even with a wad of cash, AOL would still be unable to compete with a free product.
"I think it's important to understand that even if Netscape got a billion bucks from Microsoft and instantly turned [Netscape] into the world's best browser, face it: Are you really going to pay for it?
"Browsers right now are free. So until you come up with a business model that can pay for all the work that goes into 'free,' I don't believe you're going to see much 'competition,'" Kastner added.
'Free' Hard To Beat
Forrester's Howe agreed, saying that as long as Microsoft gives away a free browser to consumers, there can be no competition in that market.
"So long as [Microsoft] is allowed to compete [using] a free product bundled to something that is basically a monopoly, there is no point," said Howe.
According to IDC's Kay, bringing back competition would not affect Netscape's popularity. "You can have a suit, you can get compensation, but you can't take a browser that's essentially defunct and resurrect it," he said.
Referring to the browser wars of the 1990s, Kay noted, "There's no going back."
In Synch with DOJ
While Microsoft's Desler would not speculate as to why AOL chose this particular time to sue, he did note:
"It could be a coincidence that it's in the middle of a process to approve the settlement between Microsoft and the DOJ. We know they've been working behind the scenes to try and influence that process."
On Wednesday, Microsoft charged AOL in the federal antitrust case with withholding documents that show AOL was working with the nine states continuing their lawsuit against Microsoft.
Aberdeen's Kastner agreed that AOL's suit will have an impact on the federal settlement, adding that he was "appalled" at AOL's timing.
"The most obvious thing is that it disrupts the negotiations between the court, the Justice Department (news - web sites) and Microsoft, which are down to the last hours here to nail down a settlement on the federal case," Kastner said.
"It throws a hand grenade into that negotiating room," he added. |
