When I wrote an editorial on Monday about the rumoured takeover of Red Hat Software by AOL Time Warner (rumours that look more implausible every day), a few of my colleagues offered some thoughts of their
What about Netscape, they asked — certainly the acquisition of a Linux distributor was a shot across the bow at Microsoft, but might it not also have something to do with the has-been browser company AOL bought in 1998? Considering Netscape’s relationship with Sun Microsystems, another coworker suggested, could a Red Hat buyout be the beginning of an open-source Solaris?
I was sure of nothing except that AOL’s relationship with Microsoft was rapidly deteriorating. With the lawsuit launched late Tuesday — in which the company will seek an unspecified amount in damages for the way Microsoft’s business practices allegedly crushed Netscape’s potential — those animosities have come to a head. This lawsuit would not have been filed had the two companies successfully renegotiated the bundling pact that would have paired AOL 7.0 on Windows XP and kept Internet Explorer as AOL’s default browser.
This explains, in part, why AOL has taken so long to file its suit. The company was also no doubt biding its time as the United States Department of Justice went through its antitrust investigation. Now that eight antitrust violations have been upheld and the settlement seems to be nearing closure, AOL probably sees this as a great opportunity for retribution.
It will not be as easy as it sounds. AOL’s case will largely depend on how well its lawyers can articulate an imaginary reality wherein IE was never bundled with Windows and Netscape went on to thrive. The jury may have to render a verdict based on what might have been, and there are many IT people who cherish this dream of a victorious Netscape, however fictitious. “”Look at Netscape — they ruined that company,”” Larry Ellison told me and a few other reporters at Open World a few years ago. “”(Microsoft) said they were going to put them out of business, and they did.””
The numbers certainly paint a poor picture. In 1999 Zona Research reported that for the first time, IE lead the browser race at 64 per cent, while Netscape’s share had fallen back to 36 per cent. Forget about Quarterdeck Mosaic, Wollongong Emissary and NCD Mariner — those firms had dropped out of competition long before. On the other hand, the same poll indicated that IE’s success was as much a part of a gradual shift within enterprises to set browser policies. Of the 73 per cent that set up such policies, 69 per cent chose IE. There has always been an assumption that bundling with Windows cemented IE’s place on the desktop, but IT people were making thoughtful choices, not merely accepting what was given to them.
If they’re smart, Microsoft’s lawyers will also come to the courtroom armed with testimony from Project Odyssey, the code-name for the discussions that resulted in the AOL-Netscape takeover in 1998. During the negotiations, Netscape was reportedly referred to as Birddog, AOL as Apollo, Microsoft as Mars. “”The Apollo-Birddog combination will have a wide-ranging impact for a variety of industries,”” investment bankers for Netscape wrote in a document to AOL, promising an “”industry-defining transaction”” that could provide an “”improved ability to compete”” with Microsoft. This kind of swagger is common in merger talks, but if they are rehashed now they will make Netscape (and, by extension, AOL) look merely like sore losers.
If AOL wins this case, it will be just another arrow of outrageous fortune Microsoft has already endured. If it loses, the fantasy of a triumphant Netscape will die, taking with it some of the luster and brand value of the Netscape name. Call it a fall from Olympus: like Apollo, AOL is seen as the golden child here, but as Mars — the god of war — Microsoft knows that this is a battle in which more than one firm’s reputation is on the line.