AOL, MS to Finalize Deal for XP Real Estate

In a significant turn of events, corporate behemoths AOL and Microsoft have decided to play nice and finalize a deal to bundle AOL client software with Windows XP. BetaNews has learned AOL representatives were invited up to Redmond for a three-week integration session at the end of this month, a step the company internally feels "is a big win to aid our bundling efforts." AOL hopes to include Steppenwolf, the XP compatible version of AOL 6.0, in the October 25 release.

The original agreement to bundle AOL with Windows ended January 1 of this year and both parites failed to reach a compromise on renewal. Fears within AOL about the future of their client surfaced last month, as the company began to investigate alternatives to working with Microsoft.

AOL has seemingly opted to partner with Microsoft and do whatever necessary to continue distribution with Windows.

While Steppenwolf is fundamentally the same as AOL's current 6.0 release, it must meet stringent XP requirements with regards to compatibility and size. According to internal documents viewed by BetaNews, AOL has requested approximately 84MB of CD real estate for various client languages, 14MB more than Microsoft is reported to have available. Options to reduce size with a single installer for multiple languages and removal of components such as Real are being explored.

AOL has not met Logo requirements and WHQL certification for Windows XP, which could prove to be an additional sticking point for Microsoft. A second trek to Redmond is planned for this month to hash out any compatibility issues and ensure Steppenwolf passes muster.

Another stepping stone for AOL is Microsoft's new OEM policy outlawing the use of desktop icons, placement the company heavily relies upon. This has become an important deal point and according to internal documents, AOL is looking to "determine if there is a way we won't be cleaned up."

Also affected by this upcoming move is RealNetworks, who ironically just announced the launch of MusicNet, a joint venture with AOL Time Warner. Real's exclusivity contract ends mid-July and AOL will use the opportunity to integrate Windows Media Player with Steppenwolf by May 31. WMP will initially launch only for Windows Media formats, however AOL is considering the implications of an exclusive contract with Microsoft.

According to sources, AOL had not been on good terms with RealNetworks after Real refused to support efforts to slim down their RealPlayer software.

Both AOL and Microsoft gave a resounding "no comment" to questons about the new agreement, as final terms are still being discussed.

Although it remains to be seen what Microsoft receives in the deal, Internet Explorer will continue to be embedded in the AOL client. Steppenwolf will not contain Komodo, a technology allowing AOL to use the Gecko browser engine, which is set to appear in version 7.0.