REMOVING MICROSOFT'S LAST HURDLE: WAS IT A CONSPIRACY?

By Peter White The sale, and virtual overnight demise of Netscape Communications Corp as a threat to Microsoft's dominance of corporate internet technology, put a knot in many a stomach. Days later that knot may still be with some of us. Purchased during the most important trial in computing history, and purchased by a company - America Online Inc - that has no aspirations to pursue the business domain, Netscape has effectively lost any chance it once had of influencing the future of internet server technology. The only player now actively using that technology is Sun Microsystems Inc, selling it under license. The effect of this is hardly less than earth shattering. About half the market has been holding out against Internet Explorer. Perhaps they wanted to support an underdog in Netscape. Perhaps they thought that it was an inferior technology to Netscape's. Or perhaps they were supporting it simply out of habit. But the amassed ranks of Netscape partners have ensured that the technology that starts with its browser ac tually leads to some clever server and helper options that meant you could pretty much get anything done that you wanted using their tools. Now those partners have to make a choice. Do they desert and head for Redmond, build a new relationship with Sun, or drop any pretensions of supporting corporate options and seek a business among the consumer interests that drive major portals like AOL? Divided, they are likely to fall rather than conquer, and without the arrogance, technology and visionary leadership that was previously provided by Netscape, they are very likely to be divided. Wasting shareholder money The outcome from this takeover could not have been better for Microsoft had it been deliberately orchestrated. One fact stands out a mile as meriting further explanation and investigation. If AOL spends $4.2 billion of its shareholder's money and decides NOT to use the Netscape browser for its service, it is wasting shareholder money and the Board should all fear for their jobs. But that's what it says it wants to do. AOL leaders have been consistent in saying that the Microsoft browser deal will stay in place. AOL representatives have sat in the Washington trial claiming on the one hand that they were coerced into taking IE, while on the other hand, now that they own Netscape, they still think Microsoft is best. This may be taken as a strategy of appeasement, and a statement of "non-competition" with Microsoft. But if you don't want to compete with Microsoft, then don't buy its most dangerous competitor. That's when the knot in the stomach tightens. Surely a Netscape in the hands of Novell Inc might have put a ring fence around the desktop that even Microsoft and its much vaunted NT may have had trouble surmounting. And in the hands of Sun, the server side would have been secure and a safer bet for internet service providers. But in order to drag people into the paid for server market, and to support end-to-end e-commerce, control of the browser and where its technology goes is essential. Even the purchase of Netscape by Apple Computer Inc would have made more sense than AOL buying it. Anybody buying it would have been happy to virtually give away control of the portal (with some mouth watering concessions) to AOL (or to Yahoo Inc or someone else) and that deal could have been brokered swiftly and simply, saving AOL shareholders this massive dilution but getting them what they claim to want.

Hidden agenda Which is why the knot in the stomach is still there and the feeling that a hidden agenda is working here, persists. Which is why we have to start asking questions now, and we need answers rapidly. Could this all be a ploy sponsored in some way by the biggest apparent benefactor, Microsoft? For instance, has there or will there be an adjustment in the relationship between AOL and Microsoft? If not, it is inevitable to expect Microsoft and AOL to begin distancing themselves from each other, and for the Netscape browser to replace IE at year end, despite protestations to the contrary. An AOL later acquired by Microsoft would surely be cause for government intervention (although not if the Microsoft anti-trust case goes Microsoft's way). It would certainly be corporate adventuring on the grand scale. Or, is the conspiracy more likely the other way around? Sun is paying through the nose for the only web server technology on offer (initially through licensing, later through buying the source perhaps) that challenges Microsoft at the corporate level, and the terms of this deal when ferreted out will mean AOL can just print a very large $4.2 billion figure for showing off, but has had it substantially subsidized). Under terms such as these, AOL is the front man to secure a future for all the internet wannabes who have relationships with Netscape, securing their future through Sun, but helping out because it wants the portal and has the share price to broker the deal. For this to happen, more assets would have to change hands post merger completion, and AOL would incur the wrath of Microsoft, so it might as well dump IE and keep its distance anyway. Sun would also have to make more of its license to resell the coveted Netscape server technology and support its hoards of followers. A deeper look at Netscape's revenues reveals that a lot of its income came from shipping server side software. So where are the support contracts from this business going to end up? At Sun? Will the deal complete? And where will Netscape co-founder and CTO Marc Andreessen end up? He is an icon to build a major company around, and once he has his payout, he'll be free to go and do just that. But there must be at least one tiny fear bothering him at present. Will this deal actually complete? Wall Street seems to love it at the moment, but if I was an AOL shareholder (God forbid), I'd want to listen up for a couple of weeks and take a long hard look before putting in my vote. Will this all be taken to mean that there is no longer the political will to pursue the Microsoft trial? It shouldn't actually make a difference one way or the other legally, but political will is a fickle thing. These guys all just want to get on with business. The day after the trial Netscape shares might have rocketed, which is maybe why AOL moved now. On the other hand they were more likely to slump. So how much money have AOL shareholders wasted? So here we have it, a major coup carried out under the nose of the court and the Justice Department. Was it just a co-incidence that the court was meant to decide the fate of Microsoft and internet market, but that the decision has been made instead by a bold corporate move. Or do we blame a conspiracy? The questions that remain unanswered have the knot tightening every day. Only the answers as they unravel will serve to take that knot away.