Merger fallout

Expect the consequences of America Online's acquisition of Netscape Communications to be profound across the Internet. Here are few predictions:

The big winner will be Microsoft. As AOL adds Netscape's 40 per cent browser market share to its own installed base of 14 million customers, it will cut the legs out from under the Justice Department's case. Sure, the government will argue that Netscape was forced to sell out and that AOL's browser is based on Microsoft technology, but the fact remains that customers will have a clear choice of products from two financially healthy competitors. Strange that Netscape and AOL, both of which have provided damning evidence against Microsoft in court, should then do a deal that renders the whole case moot.

The big losers will be users of Netscape's high-end server products. AOL has no interest in selling commerce servers, so it will hand that task off to Sun Microsystems. Sun is a fine company, but it isn't at all clear how much enthusiasm it will bring to the task.

Chill the rhetoric. Expect a lessening of the belligerent nonsense that characterises the anti-Microsoft holy wars. AOL is a supremely practical company, dedicated to its own success and not prone to engaging in crusades. If it has to play nicely with Microsoft, it will do so, regardless of who that may offend.

It's open season on consolidation. Guess what? The Net has grown up, and it's time for the big winners to secure their holdings. If you're promoting your company on the Web, the big brands to deal with will be Microsoft, AOL, Yahoo, Amazon and maybe a couple of others. If they can maintain their stratospheric valuations, those companies will use their stock to snarf up the also-rans and build their megasites.

A big question will be whether AOL continues Netscape's open-source code initiative. AOL built its fortune on a closed, proprietary online service and has given in to Internet standards only under duress. If AOL takes Navigator development back inside, it will be a slap in the face to the open-source movement. Just what Microsoft wants.

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