Originally created 11/28/98

AOL to develop new gadgets

NEW YORK -- If America Online Chairman Steve Case delivers on his promises, his company's merger with Netscape could lead to brand new ways of navigating the Internet.

One of the most ambitious goals of America Online's $4.2 billion takeover of Netscape Communications is to speed creation of a slew of Net-surfing gadgets, including wireless, hand-held computers, smart phones with screens, even a flat panel that sticks to your refrigerator door.

Similar promises for futuristic gizmos have been made before, and so far few have become reality. But AOL is hoping that its purchase of browser pioneer Netscape -- and an alliance with computer maker Sun Microsystems -- will allow introduction of the new products faster than competitors introduce their own, especially the company likely to become their biggest foe -- Microsoft.

AOL has given access to the Internet to millions of people, but almost all through personal computers.

Now PC sales are slowing even though fewer than half of U.S. homes own computers. That limits the ability of businesses like AOL to sign up new subscribers and sell more advertising, which are its biggest revenue sources.

Mr. Case's short-term goal is to dominate the main existing Internet sites where people get information and buy goods and services. He wants to do that, in part, by giving the 14 million subscribers to AOL's proprietary online service easy links to Netscape's popular Netcenter site, a portal to services and information geared toward businesses. Together, Netscape's and AOL's sites reach a staggering 70 percent of all Americans who access the Internet, according to NetRatings, a research firm.

But the deal's longer-term aspects are more tantalizing.

Today, Netscape's Navigator browser lets users of PCs view and retrieve Internet information. Should Tuesday's deal be completed, AOL will work with Netscape's roughly 1,000 software programmers to tailor future versions of Internet software that work with all sorts of electronics gear.

In addition, AOL wants eventually to customize what it transmits to subscribers. Instead of receiving AOL's full range of news, entertainment, chat rooms and other features, a subscriber could, say, sign up only for personal investing advice and stock quotes.

The cost savings could be a big draw, said Tom Rhinelander, an industry analyst with Forrester Research, based in Boston. Under one scenario, the service could cost, say, $25 a month, including the equipment. That is not much more than today's typical fee of $20 a month for Internet access, minus the need to buy a $700-$1,200 computer.

The possibilities may be limited only by the willingness of consumer electronics makers to churn out futuristic products. AOL hopes to prod companies like Sony and Philips to create all sorts of equipment using AOL's content and Internet access, Netscape's browser technology and Sun Microsystems' flexible programming language called Java.

"We've put all the pieces of the puzzle together," said Barry Schuler, president of AOL Interactive Services.

Instead of sitting in front of a personal computer, a user could punch the screen of a hand-held gadget en route to work. TV viewers could click their way to news about a favorite sitcom star they're watching.

Need a phone number? Punch some buttons on your screen phone. Just touch a flat screen attached to your refrigerator door to order some pizza.

Some simple devices could hit store shelves by the end of next year, Mr. Rhinelander said.

What could possibly thwart this bold vision? Microsoft, of course.

The software giant has developed its own operating system for running the basic functions of consumer electronics equipment, including TV sets.

Mr. Schuler said AOL is open to using Microsoft's operating system if that's what consumer electronics makers want. But AOL's new drive could set up the company for a clash. Microsoft owns Web TV, a fledgling service that lets people access the Internet using their TV sets.

Still, a big AOL strength is its experience creating Internet programming, said Tim Bajarin, head of Creative Strategies Research International, a San Jose, Calif.-based consultancy.

America Online last year hired Brandon Tartikoff, one-time head of NBC's entertainment division, to bolster its development of online programs focusing on television, movies and other diversions. Though Mr. Tartikoff died just months later of Hodgkin's disease, Mr. Case hasn't given up those goals.

"I believe what he truly wants AOL to become is a fifth (TV) network," Mr. Bajarin said.


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