AOL, Netscape Shares Surge on Possible Deal

America Online Inc. and Netscape Communications Corp. shares surged on investor optimism that the No. 1 online service might distribute Netscape’s Internet browser to better compete against Microsoft Corp., people familiar with the companies’ talks said.

America Online advanced $8.38, or 11%, to close at $83.75 on the New York Stock Exchange. It was the most active U.S. stock. Netscape climbed $10 to close at $39.25 in heavy trading on Nasdaq.

America Online gives its 14 million members access to the Internet through Microsoft Corp.’s Explorer browser, under a contract that expires Jan. 1. AOL might team up with Netscape because Microsoft is ramping up its MSN online service.

Microsoft is building its online offerings, travel services and other “content that is competitive” with America Online, said Ned Brines, an analyst at Roger Engemann & Associates of Pasadena, which owns more than 500,000 shares of AOL. “AOL is realizing it doesn’t need Microsoft today.”

Netscape’s Web browser has been losing market share to archrival Microsoft as the Redmond, Wash.-based company has been aggressively promoting its online sites such as Slate magazine and travel services site Expedia to lure more users.

The latest negotiations could produce a stronger co-marketing agreement between Dulles, Va.-based AOL and Netscape’s Netcenter Web site, and AOL might buy a stake in Netscape, the Wall Street Journal reported earlier.

America Online and Netscape officials declined to comment.

America Online and Mountain View, Calif.-based Netscape have been partners in the past. The companies unveiled a content partnership in August that provides AOL’s city guides for Netscape’s Web site in a two-year agreement. America Online and Netscape share the revenue generated by that venture.