Microsoft's Internet Explorer Faces Uncertain Future Amidst Antitrust Trial

Strategic Insights -

A senior Microsoft executive's testimony in federal court has revealed that America Online, a major user of Internet Explorer, has renewed its contract with Microsoft, at least for now, despite plans to abandon the browser in the future. The decision is seen as a temporary reprieve for Microsoft's effort to make Internet Explorer the industry standard, but experts believe a switch to Netscape Communications, Microsoft's main competitor, could severely damage Internet Explorer's market share.

Key Takeaways:

  • America Online has renewed its contract with Microsoft, despite plans to abandon the browser in the future, citing political reasons and a desire to influence the outcome of the antitrust case.
  • The contract, which expired on January 1, is a crucial arrangement, as America Online subscribers now number over 16 million, accounting for about 40 percent of Internet Explorer users.
  • Microsoft's Internet Explorer is the default browser for America Online subscribers, and a switch to Netscape would drop Microsoft's market share to 30 percent, making Internet Explorer the underdog.
  • The government and a senior America Online executive have testified that the company chose Microsoft, and limited its members' use of Netscape, because Microsoft offered promotion of America Online's service on every personal computer running the Windows operating system.
  • Microsoft has argued that America Online chose Internet Explorer over Netscape because it was a better product.
  • America Online has declared its intention to create a new browser with Sun Microsystems, to compete with Microsoft, and use with the America Online service.
  • Compaq Computer's senior vice president, John T. Rose, testified that there is no commercially viable alternative to the Windows operating system, and that Compaq had not considered looking for another operating system to replace Windows after Microsoft imposed a steep price increase.

Statistics:

  • Over 16 million America Online subscribers use Internet Explorer, accounting for about 40 percent of its users.
  • A switch to Netscape would drop Microsoft's market share to 30 percent.
  • Compaq Computer's revenue from Windows sales was affected by Microsoft's price increase, leading the company to consider other options.

Sources:

  • Microsoft Corporation, testimony in Federal court
  • America Online, Securities and Exchange Commission documents
  • Compaq Computer, testimony in Federal court