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ZDNN: MS-AOL war heats up over Net access

Aug 05, 1999, 23:17 (3 Talkback[s])
(Other stories by Nick Wingfield, David Bank)

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"The IM battle is only the beginning. Microsoft is set to wage an all-out battle for Net access."

"It is unclear whether Microsoft's latest attempt to tackle AOL will be more successful than prior efforts. ... Microsoft says it is more serious this time. Chairman Bill Gates and President Steve Ballmer have generously funded the new plan, formulated in the past six months, in large part as a protective measure for Microsoft's core software business.

AOL's dominance in online services gives it the opportunity to become an alternative software 'platform,' threatening the dominance of Microsoft's Windows operating system. Internal AOL documents disclosed in Microsoft's antitrust trial indicated that was exactly AOL's intention."

"Microsoft has already launched its strategy to help drain profits from the Internet-access business. The company's deals with retailers and PC makers to offer customers bounties of $400 in return for three-year MSN service contracts has boosted sign-up rates by 50%, the company says. The company also has tested a price point of $9.95 a month and is considering offering free service to consumers who commit to a certain level of spending with Microsoft's electronic-commerce partners."

"Microsoft also is pondering plans to consolidate the fragmented Internet-service market and broaden its cut-rate offerings. ... To finance such efforts, Microsoft is considering the creation of a 'tracking stock' to reflect its Internet-related businesses. Because the stock market has valued such stocks based on revenue, rather than profit, the tracking stock could absorb large losses without hurting the value of Microsoft's core businesses, said analysts.

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