Conference Call Transcript AOL & Microsoft

MITCH MATTHEWS: Hi, good morning and thank you for joining us. I have with me Bill Gates, chairman/CEO of Microsoft, and in two remote locations, Brad Chase, who’s general manager of the Internet and Tools Division at Microsoft, and Steve Case, chairman and CEO of America Online.

I hope you’ve all had a chance to see the press release that crossed the wire about an hour ago. If not, please don’t hesitate to call our PR agency, Waggener Edstrom, where you can get a copy of that. Their number is 503-443-7000.

When you have a question for any of the participants, if you can please stipulate who it’s for as we’re in remote locations, that would help us.

I’d now like to invite Mr. Case to say a few words, followed by Mr. Gates, and then we’ll take Q & A.

STEVE CASE: Thank you very much. What we’re announcing today, an alliance between America Online and Microsoft, I think is a big win for consumers and for content developers and for the online service industry more broadly. The gist of it, as I hope you see in a press release, is that AOL is now embracing Microsoft’s Internet technologies and building the Microsoft Internet Explorer into the AOL brand, and Microsoft is embracing AOL and including the AOL software within the Windows operating system, so it really gives consumers a choice within the operating system and it provides our consumers with a superior Web experience when they’re using AOL.

There’s been some confusion about some of the announcements we’ve made, so let me just put this in context. Microsoft will become our primary technology partner in this Internet space. We are working with Netscape; we announced some things yesterday. Basically, that’s focused on our GNN brand, where Netscape will be the default for GNN, and also Netscape will be an option for AOL customers, so if they choose to download, they’re able to, but Microsoft Internet Explorer will be built in and shipped to all five million of our customers and shipped on new disks.

We also announced an alliance with Sun today around Java, but that’s really quite different. That will be built into AOL forums as well as Web forums.

The reason we’re doing this is because the more we learned about the Microsoft technology and their strategy and their commitment to the space, and particularly their modular architecture, we felt it would allow us to better meet the needs of our consumer audience by providing this Web experience, and we do want to make sure consumers have the best possible Web experience and part of that is building something in an integrated, seamless fashion and part of that is to the extent they do have some other preference, giving them a choice. And we’re able to do this through the alliance. And obviously we’re pleased that as part of this Microsoft has agreed to bundle AOL within Windows. As you know, we’ve had a good concern about making sure consumers have a choice at that level as well, and now they do, because they all will be put in an online services folder on the desktop so that people will be able to click into that folder and find AOL and, I presume, over time other services as well.

So it really does mark a new stage of development of the online industry. We’re working with Microsoft, although they’ll continue to be a vigorous competitor, we expect, with the Microsoft Network and some other areas where we’re competing. In this particular area, we’ve agreed to join forces because we think the technologies that we’re embracing will help us meet the needs of the audience we’re trying to serve. Consumers will benefit by having the Internet Explorer built into AOL, and the other companies will benefit by having vigorous competition between Netscape and Microsoft in this area of Web technologies, and the consumer audience more broadly will benefit by having a choice of online services when they choose Windows.

So that’s our view of the alliance, and I’d like to turn it over to Bill.

BILL GATES: Well, good morning. This is Bill Gates. We’re very excited to be working with AOL on browser technology, and this covers all the different platforms — Windows 3.1, Windows 95, Windows NT, as well as the Macintosh. We’ve spent the last several months talking with the AOL technical team about the things they wanted to see in an integrated browser; that is, a browser that would support the current AOL content and unique things AOL has done, like their art compression format, as well as meeting the need for Web-type browsing. And during those discussions, we went through our road map, including the way that we’re integrating the browser into the operating system, and we came up with a lot of good ideas to show off the AOL service as part of the integrated browser that we’re creating together.

The first shipment that we’ll make together will be based on the Internet Explorer 3.0. That’s the version of the browser that’s being given out in alpha form as part of our development conference that’s being held today and tomorrow down in San Francisco. This is a major step for us in our browser business. It’s pretty amazing the growth that AOL has had, to well over five million subscribers now, and a lot of the statistics that look at people out using the Web show that either it’s the high 20 percent or low 30 percent range of people who are out there are coming from the AOL service.

We talked a lot with AOL about what they want to see in order to do great content. Of course, at our developers’ conference, we’re talking a lot about this technology, which all goes under the brand Active X, so things like Active Control, Active 3-D, Active Movies, and a variety of things that are going to make the experience of using the Web and AOL content even better in the future than it is today.

This is a partnership that has the technology aspect, and that’s a very key element, as well as the marketing element as well. As Steve said, anybody buying Windows 95, as we go through our next revision, will have an AOL icon there and available, as well as the unique software that integrates with our browser to access AOL.

We are still very committed to competing in the content space, and, of course, MSN will be there exactly as it is now and we’re investing a lot in that, and we see an opportunity to continue growing that as well. And so this is a big step for us in the browser space, and we’re very pleased to have this partnership.

MS. MATTHEWS : Can I now open it up for Q & A?

OPERATOR: Thank you. At this time, everyone’s line is in
“listen only”
except for your hosts. If you do have a question for them, you may depress the one key. To withdraw the question, depress the pound key. And for operator assistance, depress star, then zero. Once again, if you have a question, depress the one key. One moment, please.

I have Mark Lewin with a question.

Q Yeah, this question is both to Bill and to Steve. Could you talk about the genesis of this deal and also what, if any, financial terms there are?

MR. CASE: Bill, you want to take that?

MR. GATES: Sure. We can both talk to that. We’ve been talking since very early this year about what we could do together. Microsoft has put a lot of resources into this Internet browser area starting last year, and we thought a partnership with AOL would be a fantastic thing to get a message out to content developers about using the extensions that we’re making, and so there have been a series of discussions involving, on our side, Brad Silverberg, Brad Chase and myself, as well as our technical team. And throughout the discussions we had really parallel tracks, how we could help each other on the marketing side and how we could help each other on the technology side, and we just concluded the full agreement on Monday of this week.

MR. CASE: We had started an analysis within
“America On”
a few months ago about what the right approach should be going forward. As you know, we’ve been developing our own browser technology and, indeed, the next version of our software, the 3.0 version, ships with a substantially improved browser that was built internally, but we just came to the conclusion that, given the resources that both Microsoft and Netscape were investing in this area, it probably made sense to partner to get these technologies, as opposed to build them ourselves.

So then we underwent a fairly exhaustive review of the options both in terms of the technology review as well as a broader understanding of the business implications, and it was as we walked down that process and learned more about the Microsoft technology strategy, it was clear to us that the modular architecture would make sense in terms of building it seamlessly into AOL.

Obviously a difficult issue for us that we had to deal with early on was recognizing that Microsoft was a competitor in the online space and also making sure that our concerns that we’ve expressed in the past about getting bundled with Windows were addressed, but once we cleared some of those hurdles, we were able to put together this alliance. And, as Bill said, it really was just signed last night.

Q Could you talk a little bit more specifically about the financial terms?

MR. CASE: We’re not going to get into the specifics of the deal. It is a multi-year deal and I think it’s going to be a particularly strategic deal to both companies, but we’re not going to go into a lot of the details.

MR. GATES: Yeah, there’s no significant financial impact in terms of money flowing in either direction.

Q Okay.

OPERATOR: Margaret Cain from PC Week with a question.

Q Hi. This is for Mr. Gates. Just bundling the AOL onto the 95 software, do you think this will help in the — I guess it’s still ongoing — the Justice investigation regarding antitrust, I mean, now that you’re putting it right out there on the operating system?

MR. GATES: Well, it’s —

MR. CASE : It’s hard to say. I mean, the issue, we’ve always said, is that we want to make sure consumers have a choice and there’s a kind of a level playing field, and Microsoft agreeing to create this online services folder on the desktop and put AOL in that and I would presume over time possibly others I think does address the principal concern that we’ve raised rather habitually over the past year.

MR. GATES: We were not motivated to do this deal by anything related to the DOJ. We’re not aware of what they’re doing, but they certainly haven’t spoken with us about anything related to this since well before the shipment of Windows 95.

Q Do you — just following up — will there be other online services included, as Mr. Case just said? I mean, he speculated, but you probably know a little bit more about that.

MR. GATES: Well, today we’re announcing the largest and most important partnership we’ll have in this area, which is with AOL. The structure of the deal is not exclusive, so it allows us to put other icons in that folder over time, and although I’m sure we’ll pursue that, we don’t have anything concrete at this time.

Q Okay. Thank you.

OPERATOR : Steve Vanderhart from Interactive Week with a question.

Q What will the desktop icon look like? Is Microsoft Network going to be included in that online folder? Is it still going to be an additional click to get into AOL?

MR. CASE: It will be an additional click to get into AOL. The Microsoft Network icon will remain on the desktop, but an online services folder will be placed next to it on the desktop and AOL would be within that folder.

MR. GATES: There are three places that you’ll see AOL. When you do the install, where you see it asking if you want to install MSN, you’ll also be able to go to other online services. You’ll see AOL in the start menu under
You’ll see other online services with AOL. And then on the desktop, there’ll be this folder which will include AOL.

Q Mr. Gates, how does is the position of Microsoft in terms of future marketing of browsers to other folks, say like telecommunications companies?

MR. CASE: Well, it’s hard for me to speculate. Obviously, Microsoft has taken this whole area pretty seriously and believes that they have the technologies that a marketplace will want to embrace and recognizes that Netscape has a lot of momentum in this area, but seems fairly committed to emerging as a major player, and our sense is that Netscape does have a lot of momentum and that Microsoft is quickly creating a lot of momentum and it’s clearly now a two-horse race.

Q Could Mr. Gates respond to that as well?

MR. GATES : The Internet browser is something that we’re integrating into the operating system. In a certain sense, you could say browsers have heavy distribution today in the sense that you can download them, you can get them when you sign up for your connectivity, you can get them in the operating system, and you can buy them through retail as well.

Eventually, that may come down to that people just use what’s built in, but we’re using all of those channels to make the Internet Explorer available, and particularly as we get Version 3.0 out, which we feel puts us in a leadership position, you’ll see us be very aggressive in driving that availability. So, you know, you can expect lots of telecommunications companies to announce deals with us where they’re distributing our browser.

Q Thank you.

OPERATOR: I have John Metezny of National Public Radio with a question.

Q Actually, my question has been asked, but thanks very much.

OPERATOR : I have Jim Erikson of The Seattle Post with a question.

Q Yes, it was mentioned that it appeared on the Internet some high 20 percent or low 30 percent of the traffic there is coming from AOL. Do you have any indication on how much might be coming from Microsoft Network?


MR. GATES: Well, the only figures that we’ve got that we talked about publicly at this time is that we’re over 850,000 subscribers, and so, you know, unless our subscribers are much heavier Internet users, it would just — you’d pro-rate that to the AOL figures.

Q Okay. Also, when is Internet Explorer 3.0 due out?

MR. CASE: This summer.

MR. GATES: The Internet Explorer itself, this summer. The alpha version is being given out to developers at the developer conference, and very soon after that, we’ll ship the integrated version, which is what goes into the Windows box and what AOL will be distributing that includes the unique AOL browsing content capability integrated with the IE 3.0, and that we’re committing to have in the fall time frame.

Q Okay, thank you.

OPERATOR: Heather Green from Bloomberg with a question.

Q My first question is for Mr. Gates, a very simple question. Why do you want AOL on Windows 95?

MR. GATES: Well, the Windows user will now find it very easy to get to AOL and, you know, we think that’s a nice thing for Windows users. Obviously, our willingness to market AOL by including that access in Windows 95 is part of the overall relationship where they are helping us to market our browser and our browser extension to content people, and it’s something we felt made it a very good deal for both companies.

Q Is this an admission, in a sense, that Microsoft Network hasn’t panned out?

MR. GATES: No, absolutely not. We continue to invest very, very heavily in the Microsoft Network. We’re doing all sorts of exciting things there. Our growth has been excellent, and, you know, that’s something we’re hard-core on.

Q Are you moving it to the Internet anytime soon?

MR. GATES: Well, if you’ve been following our strategy, about six months ago, that’s what we did.

Q And do you think that you’re going to appeal to a different type of customer, subscriber, than AOL with MSN?

MR. GATES: Actually, there’s a number of MSN users who are also AOL subscribers, so based on where our content is drawn, where their content is drawn, you’ll get some differences in terms of what type of community appeal you’re able to create.

MR. CASE: As I said earlier, a lot of this is about consumer choices, and it’s — I don’t think it’s a, you know, one-size-fits-all kind of world. We do expect the Microsoft Network to be a major competitor in this online services space, and we do think they’re making significant investments to enhance the content and context and community and other things that we think are important, and there are other competitors, CompuServe and Prodigy, and there’ll be others entering the market. So it’s still early to predict, you know, how this all plays out, because only 11 percent of households in the United States subscribe to any of these services and 89 percent don’t.

We do think the AOL brand has a lot of momentum, a lot of people to fall in love with it. Because we have five million customers, we’re able to integrate the best technologies, we’re able to attract a lot of content companies and so forth, but we know there’s still a long road ahead to really make this a mainstream phenomenon, which is why we continue to partner so aggressively with companies such as Microsoft today.

Q I just have one last final question for you, Mr. Case. Can you tell me why it’s important for AOL to use Microsoft’s software, and I’m not talking about the browser.

MR. CASE: I’m not sure what you’re talking about then.

Q As part of your press release today, it talks about AOL will use Microsoft extensions and opening —

MR. CASE: That’s really part of the overall browser issue, that the number of companies, including Microsoft, are defining extensions and encouraging content creators to support those extensions. So, by integrating Internet Explorer into AOL as sort of the default browser, we by definition are supporting and encouraging the use of those extensions.

Q Are you going to use their publishing software, as well?

MR. CASE: I think it’s a little hard to know. We certainly have a licensing agreement that allows us to use a number of different technologies. I would presume we will be using more and more of their authoring capabilities, but this primarily is about providing consumers with a choice, and I think Microsoft is quite vigorously building a third-party development community, which is part of what’s happening this week in San Francisco, to get support from people using their authoring technologies.

Q Thank you very much.

OPERATOR: I have Dave Aiello of Alex Brown & Sons with a question. Mr. Aiello, you may ask a question.

Q No question.

OPERATOR: I have James Kim of USA Today with a question.

Q Hi. Bill, you talked about the Internet Explorer 3.0 putting you in a leadership position. Could you discuss a little bit the specific extensions and the specific functionality that you guys will be offering that perhaps Netscape doesn’t have yet in their Navigator 2.0?

MR. GATES: Yeah, of course, in the browser business the time clock ticks very rapidly as people like ourselves and Netscape have major new versions several times a year. What we’re announcing at the developers’ conference is a set of technologies we call Active X, and that’s the idea of moving from these very static pages that just sit there to pages that interact with you, that include video and audio, include rich form fill-ins. And so part of that is called Active Controls. Part of it what we call Active Movies. Part of it is the Active 3-D capability. So that instead of looking at a page, you’re actually walking around inside a store and meeting other people. And we expect that a high percentage of Web pages will use these active extensions, and that’s one of the things we’re working with AOL on is to see how they can make their content better by taking advantage of those things.

So these are leadership capabilities that the 3.0 browser will include.

Q Of course, you can already get a lot of that through Netscape’s Navigator 2.0, the plug-ins, et cetera. I mean, you can go out on the Web now and see some of those.

MR. GATES: No, don’t confuse plug-ins with Active Control. Plug-ins let you take a new data type, and, of course, the IE 3.0 supports the Netscape plug-ins. We’re compatible with their complete plug-in architecture, so anything that had been done for Netscape plug-ins will work in the Internet Explorer 3.0. So there we’re matching what they’ve done with things like frames and their plug-ins. We’re moving ahead of them with the Active X technology that embraces a number of new capabilities.

Q But you expect to — for Netscape, to also come up with ways to offer, you know, rich video, rich audio, and rich text and rich content?

MR. GATES: Certainly.

Q Yeah.

MR. GATES: I mean, that’s the browser business as we’re both moving at full speed. We’re doing some things we think will take leadership there.

MR. CASE: The AOL view is that this whole browser discussion is relatively new on the scene. We founded our company more than a decade ago and Netscape really emerged just in the past couple of years and obviously, has a lot of momentum, but there are still a lot of issues to face to really make this a mainstream phenomenon.

We’re obviously pleased to be working with Microsoft and Netscape. The focus of Microsoft is AOL, and that obviously is our largest volume opportunity, because we have over five million customers there. But we’ll also be working with Netscape on the GNN side. We think both companies will continue to compete vigorously to really extend their technologies. A strategic decision for us was, rather than try to have a third horse in that race, which was AOL really trying to do its own thing, it struck us as making more sense to partner with these companies as opposed to try to replicate what they’re doing, because the level of investment they’re committed to making to really innovate and differentiate is really quite staggering.

Q Bill, one quick thing. Do you want to hazard a guess as to when Microsoft will overtake Netscape’s commanding market share position in the browser arena?

MR. GATES: No, I think that would be like trying to predict when we’d lead in the spreadsheet business or the word processing business, and all I can say is that we have the same type of dedication to building a great product here that we had in all the major arenas we’ve gotten into.

Q Is there room for two players?

MR. GATES: Well —

MR. CASE: Yeah, I think so, sure. If you look at a lot of these businesses, there’s —

MR. GATES: You know, free software. You have to say is there room for one player. I mean, it’s all free software. Economically, it’s one of the most unusual software categories that there’s ever been. So you have to think of it not just in terms of the browser, but rather in terms of server software like electronic commerce or media servers, and the Internet is exploding and so the Internet software business is a big, big growth area, and there’s certainly room for lots and lots of companies, including ourselves and Netscape, to do well in that arena. So if you look at the broader context, this is a great area to be working in.

MR. CASE : I agree with that. I think both companies will thrive because it’s still relatively early in the development of this overall industry, and there’s lots of opportunities. If you look at history, it strikes us a little bit of this happened in the cable industry about a decade ago, where a number of the cable companies were creating their own technology, their own decoder boxes, and so forth, but over time really two companies emerged as the leader, Scientific Atlanta and General Instruments —

MR. GATES : Right.

MR. CASE: — and the companies trying to build their own over time decided it would be better to partner with others, and that’s basically where we are. We think of ourselves more as a company like TCI, with investments in content and subscriber bases and technology infrastructure and so forth, but that doesn’t mean we have to do everything ourselves. Indeed, we’d rather partner with people where it’s appropriate, and in this particular instance, partnering with Microsoft and as well with Netscape and Sun gives us the ability to leverage their best efforts and take it to market to meet the needs of our millions of consumers.

Q Okay. Thank you.

OPERATOR: I have Jeff Swett of Client-Server News with a question.

Q Yeah, I have a question — one for Steve and one for Bill.

Steve, regarding your announcement this week with Netscape, what’s the level of integration — I know that you said that you are going to offer and let your AOL customers choose Netscape if they so choose. What’s the difference between the level of integration that you’re doing with Microsoft and what you’re offering with Netscape?

MR. CASE: Well, the AOL and GNN brands are quite different and going after, we think, quite different markets. For the AOL brand, the Internet Explorer will be built in a seamless way, just as our current browser is built in, and we develop content around that browser in a more unified way, we think, than you could do with kind of a stand-alone, you know, Internet experience.

The Netscape is really the primary browser for GNN, but in both cases, we’re letting consumers decide. If they’d prefer the other, they’re welcome to download that and use it, but we do think the vast majority of people will use what we’ve built in as the default.

Q Now, how many customers do you have on GNN, and why are you using, you know, Netscape for GNN as opposed to Explorer? What’s its strengths there?

MR. CASE: Well, we have not announced the specific data on GNN yet. We did indicate that in the first quarter that GNN was available, we thought we added as many customers in that particular quarter as anybody else in that market, such as Netcom, which is the leader, so it was off to a good start, but the order of magnitude still in terms of the different market size we’re going after, with AOL really aimed at a mainstream audience, whom we think of as sort of the early majority, which are tens of millions of people, and GNN going after more of the innovator, early adopter market, which is now hundreds of thousands headed to be millions.

So it really is a branding strategy that recognizes how these markets are likely to develop in terms of broad-based consumer deployment.

In the case of the assessment on the AOL brand side, we thought the Internet Explorer seamlessly integrated to AOL as the primary browser made sense for our customers, although giving them the choice I think also made sense. For GNN, we felt the Netscape Navigator was the better choice, providing Internet Explorer as an option. And we’re pleased to work with both companies.

Q Good. And one for Bill. How does your Active X — how does it tie in with Java, which I believe you guys just announced that you were — you just finished your licensing agreement on that?

MR. GATES: Active X is an architecture that lets you put controls and different media types into a Web page and any of those objects, obviously, can have scripts, where Java or any other language can be tied to the events that come out of that page, so like when you open the page, when you select something in the page, that’s generating events. Those events can trigger arbitrary programs, some Java programs or C++ programs can be connected up and be part of the behavior you get using that page.

In our developers’ conference, this is the big focus of over a 2-1/2-half-day period — a great deal of information, including lots of CDs with material that we’re giving out to all those attending, so they’ll be very versed in this by the end of the conference.

Q Well, does Microsoft have a strategy of, say, more of just working with Java, or are you guys actually pushing it as a strong part of your Internet strategy?

MR. GATES: Well, Java’s a language —

Q Yeah.

MR. GATES: — and, you know, we’ll support Java like we support Visual Basic, like we support C++. Somebody using content doesn’t know what language it’s in, and so developers will have a choice of all the different languages. You know, we’re glad we concluded the agreement with Sun, and that’ll let us support Java as a first-class language, but in the world of operating systems and content, you know, the exact choice of languages is not the primary factor.

MR. CASE: Right. I think it’s an important point to reinforce, that there has been a tendency in recent months to focus a lot on technology, and certainly technology is an important enabler, but what’s really going to drive this online services market into the mainstream and reach tens of millions of people is not technology in and of itself, but how you build engaging interactive experiences with that, and that’s really where AOL is focused. We are a little less religious on the technologies and more religious on the end consumer experience and how you take these different components and piece them together in a way that provides that kind of experience.

Q Right. All right. Thanks to you both.

OPERATOR: This is Lauren Fine from Merrill Lynch with a question. Ma’am, you may ask your question.

Q I didn’t have a question.

OPERATOR: Mr. Gordon Jasselof from Media Daily with a question.

Q Yes, this is a question for Steve Case. There have been reports that Microsoft was attempting to derail the talks with Netscape. Can you talk about that a little bit? And the second question on how far the alliance between Microsoft and AOL might expand? In other words, have you left open the door to the possibility of doing cooperative efforts with Intel, with Direct TV, with NBC?

MR. CASE: Well, as relates to the first part of the question, I think Netscape and Microsoft have both been aware for some time that we’re in discussions with all the companies in this industry, trying to figure out what would best meet the needs of our consumers, and obviously where it came out was a strategy where we relied on Microsoft as the primary source of Internet technologies because AOL is our primary business, and it’s the built-in browser. We’re also working with Netscape around GNN and also with Sun around Java.

As it relates to the second question, anything is possible, but the focus of this announcement is really on AOL embracing the Microsoft Internet technologies and bringing those to market for our customers as the built-in option for AOL and as an option for GNN customers, and also Microsoft building AOL into Windows operating system. There have not been discussions about other things, and it’s complete speculation in terms of whether at some point something else might make sense. I do think the companies are being pragmatic about looking at ways to work together to meet the needs of marketplace and perhaps there are other things, but I don’t have any great expectations that there’ll be other things.

Q Can I just follow up on the first question? Did the talks with Netscape break down? Would you say that Microsoft came in later? What was the timing here?

MR. CASE: Well, the talks with those companies really were happening in parallel, so I don’t think anything particularly broke down. We did announce an alliance with Netscape yesterday, and we announced an alliance with Sun) this morning as well as this broader alliance with Microsoft today, so we’ve been in discussions with all these companies trying to understand their technology strategies and try to figure out the best way to knit these technologies together to meet the needs of the audience we’re going after.

Unfortunately, I’m going to have to drop off the call, because I have to go do some other event. Maybe we have time for one last question.

OPERATOR: Mr. Bill Gurley from CS/First Boston.

Q Yes, thank you. I was wondering if the built-in dialer in Win 95 was going to play a part in this or if AOL would include its own dialer?

MR. CASE: Well, the AOL software will be bundled essentially as is with Windows 95 and the successor operating systems, so it would include our dialer. If at some point some component of the operating system makes sense for us to use that as opposed to our own code, we’d certainly be open to that.

MR. GATES: Yeah, there’ll basically be different dialers there. If you click on AOL’s icon, then the software that we’ll work on together will know the AOL phone numbers and connect you up there. If you use the MSN icon, obviously it’ll use the phone numbers that are appropriate there. And so even though there may be some shared code there, you’ll start off by deciding which service you want to connect up to, and it’ll do the right thing in terms of phone choices.

MR. CASE : I think just to sum up before I have to get off the call, I think it’s an important announcement for both companies and also probably more significantly for the industry at large, as well as consumers. There’s now going to be vigorous competition in terms of Web technologies, which I think is healthy. There will now be more choices for consumers in terms of online services within the operating system, so I think this is an important step forward in trying to move the online services market from something where 11 percent are subscribing to something that the majority of people can subscribe to these services and really benefit from the many things you can do on services, whether it be AOL or MSN or CompuServe or others, which really do hold the promise of changing the way people get information and communicate with others and buy products and learn new things and so forth. And technology is an important building block of that, and I think Microsoft’s efforts in this space are significant, and,

as things play out, I think people will recognize that this is going to be a vigorous battle between Microsoft and Netscape and potentially others to develop these technologies.

AOL’s embracing both companies, but the AOL brand will essentially have Internet Explorer as the primary service. It will be the built-in default service. So, by definition, most of the market share that we have will be headed to the Microsoft Internet Explorer camp, but both companies, I think, will continue to invest in this space, and I think it will benefit content developers, as well as consumers.

MS. MATTHEWS: Well, thank you. That concludes the conference call. The press releases from the PDC and the announcement today for this conference call are on the Microsoft Web page. A transcript of this conference call will also be posted later today for anyone who’s missed it.

Thanks for dialing in.


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