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AOL deal sparks pundits day in court

Will it or won't it? The jury's out - matter of fact, there's no jury anyway

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It was pundits day in and outside Judge Jackson's courtroom in Washington yesterday, following firmer news about the expected merger between AOL and Netscape. In the courtroom Michael Lacovara spent an hour quizzing Dr Frederick Warren-Boulton, a consultant economist for the DoJ, on what he thought of the AOL-Netscape move, but he didn't get the reply that he wanted. "To the extent that Netscape has been forced to the wall, that's an unfortunate outcome of what Microsoft has been doing." W-B said he was "not clear why this merger is going to fundamentally change AOL's calculus if it accepts a similar deal [to the one it has with Microsoft over IE] in January." At present, the Microsoft agreement limits AOL to distributing no more than 15 per cent of "non-Microsoft browsers". Outside the courtroom, David Boies, the DoJ special trial counsel, said that any deal was "not going to remove any obstacles that Microsoft has put in the path of competition". If AOL felt compelled to use IE after it owns Navigator, this would be "very powerful evidence." A currently favoured belief is that Judge Jackson won't now need to be so tough on Microsoft, since Netscape has been sold for a good price. But if the price is compared with what it would have been a year ago, it is clear that this is a specious argument. It is strange that commentators so far do not appear to have questioned how AOL would make a profit by acquiring part of Netscape. The only possibilities are for AOL to move to the professional market - where it admittedly has a toehold with the ailing CompuServe - and to get more involved in electronic commerce at the consumer level. It will not be easy for AOL to get a return on $4.2 billion of its paper. The other major consequence for Microsoft is that such a deal would make it more difficult to establish MSN. W-B said that Microsoft had a "fight them on the beaches strategy" towards Java. He noted that developers would use a Windows-only version of Java because of Windows market share, but what might be in the interest of an individual developer may not be good for them as a group. W-B estimated that Microsoft's share of the browser market would be 30 per cent (compared with 45 per cent at present) were it not for its near-exclusive contracts with Internet service providers. ® Complete Register trial coverage

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