AOL and Sony OK Network Alliance

AOL Time Warner Inc., the biggest Internet and media company, agreed to work with Sony Corp. to develop devices and services to establish networks in homes through high-speed Web access, rivaling Microsoft Corp.

Terms of the nonexclusive agreement weren’t disclosed. The companies are working on networking gear that will let consumers link personal computers with hand-held computers and other devices through Internet connections. They also are developing an Internet browser suitable for devices smaller than PCs.

With personal computer sales slow, AOL Time Warner has sought to persuade its more than 31 million America Online subscribers to pay for Internet-connected devices such as e-mail pagers. The alliance with Sony will produce more and easier-to-use Internet services, making the devices more attractive to consumers, AOL Time Warner Chairman Steve Case said.

“It’s similar to Microsoft and Intel in trying to propel the PC as an industry,” Case said. “The problem is, [home networking] is way too complicated. If there were simple plug-and-play devices, that would propel the market for everybody.”

Shares of AOL Time Warner fell 67 cents to $36.43 on the New York Stock Exchange. Sony’s American depositary receipts, each representing one ordinary share, rose 15 cents to $39.95-, also on the NYSE. Sony is based in Tokyo.

America Online also will provide online access for Sony’s U.S. consumer devices. The companies released no details about when the products will go on sale and how much they will cost.

AOL and Sony are teaming up to compete with Microsoft, the biggest software maker, which is promoting online services and the use of its Windows operating system to run a variety of networked devices.

Microsoft’s Xbox game system will rival Sony’s PlayStation 2 when it goes on sale Thursday.

AOL agreed in May to work with Sony to provide AOL services such as e-mail to PlayStation 2 users.