Microsoft-AOL battle grows

July 30, 2001 Posted: 1116 GMT

NEW YORK (CNNfn) -- Microsoft Corp. is pulling out the punches -- even considering collaborating with rival bidders -- in an all-out effort to prevent rival AOL Time Warner Inc. from acquiring AT&T Corp.'s cable business, according to a published report Monday.

The Financial Times, citing people familiar with the matter, said Microsoft (MSFT: Research, Estimates) perceives AOL as its primary rival in the consumer Internet sector, more so after the apparent failure of Comcast's unsolicited $44.5 billion bid for AT&T's (T: Research, Estimates) cable unit, which opened the door to other potential offers.

With more than $50 billion in cash assets, the software maker has the financial clout to encourage alternate bids for the AT&T unit, rather than see AOL gain dominance in the domestic cable market, the paper said.

AOL's (AOL: Research, Estimates) acquisition of the cable unit would give it control of about 40 percent of the U.S. market, with about 29 million subscribers, and a significant barrier to Microsoft's efforts to reach beyond its desktop presence with electronic commerce, information and entertainment services, the report said.

But Microsoft executives insist the company has no interest in acquiring the AT&T unit, or entering the cable business.

The two companies are also waging a Web war, which heated up last week after reports that AOL was seeking deals with computer makers for a greater presence on desktops to pitch its Internet service.

Compaq Computer last week agreed to replace links to Microsoft's MSN Internet service with AOL links on the opening screens of new PCs.

"The stuff AOL is doing now is unbelievably egregious. They're trying to get personal computer companies to delete features of Windows and not let people have the choice of using our software," the report quoted Steve Ballmer, Microsoft's CEO as saying.

Shares of Microsoft lost $1.12 to $65.47 in trading Friday, while AOL -- the parent of CNNfn -- gained 23 cents to $45.14.

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