Microsoft to Require MSN Icon

Microsoft Corp. said Monday that it will require computer makers who put an America Online icon on the desktop of the upcoming Windows XP operating system to include Microsoft’s MSN Internet service as well.

The Redmond, Wash., software giant said last month that PC manufacturers such as Compaq Computer Corp., Dell Computer Corp. and Gateway Inc. could load anything they wanted onto PC desktops.

That move came after a federal appeals court ruled in June that Microsoft had abused its monopoly power in a number of ways, including preventing computer companies from deleting Microsoft’s Internet browser in favor of Netscape’s.

But that finding was based in part on the fact that the Netscape browser posed a threat to Microsoft’s operating system monopoly. If the AOL icon issue winds up in court, Microsoft foes may have to argue that AOL’s Internet business likewise threatens Microsoft’s hold on PC systems.

Microsoft’s about-face on the icon issue is the latest tactical move in a multiple-front war between AOL, which has the largest Internet access and instant-messaging business, and Microsoft, which has been trying to leverage its monopoly on personal computer operating systems into new areas.

It also is certain to draw scrutiny from the Justice Department and the 18 state attorneys general who sued the company for violations of antitrust laws.

The officials must decide whether to try to stop Windows XP machines from being released Oct. 25 without modifications.

That could come through a new lawsuit, through new filings in the existing case, or as part of hearings for appropriate remedies for Microsoft’s past misconduct.

After Microsoft announced that it was easing its desktop requirements, Compaq struck a deal with America Online parent AOL Time Warner Inc. to put an AOL icon on the desktop.

AOL immediately attacked Microsoft’s new stance regarding the icons, saying that Microsoft was violating the appeals court ruling.

“This is a very bold action by Microsoft, to be saying that they will not cease abusing their monopoly power,” said AOL Vice President John Buckley.

Compaq, which built its franchise around Microsoft’s operating systems and has been one of its staunchest allies, said it hadn’t been told of the change and hoped to continue promoting AOL alone.

For every new AOL subscriber, Compaq will get a reported bounty of $35 from AOL.

If Microsoft does tell Compaq of the new rule, “I don’t know that we have a whole lot of choice,” said Compaq spokesman Roger Frizzell.