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Compaq Reaches Agreement With AOL

Updated:

HOUSTON (AP) _ Compaq Computer Corp. has reached an agreement with America Online to allow the icon for its popular Internet service exclusive placement on Compaq computers that run Microsoft's latest desktop operating system.

AOL has been pushing aggressively to place its products on PC desktops, now that rival Microsoft is allowing greater access. In return, AOL says it will pay manufacturers a commission for each new customer it gains through such exposure.

Customers who buy Compaq computers with Windows XP, the latest version of the operating system, will first see the new startup desktop featuring AOL and CompuServe icons beginning Oct. 25. CompuServe is owned by AOL.

MSN will still be available, though a short cut won't appear on the desktop. Computer users will have to go through their startup menu to access the Microsoft service.

``It was late last year that we decided that AOL would appear on the startup exclusively and pay a higher fee to do so,'' Compaq spokesman Steve Sievert said Friday.

The Houston-based No. 2 personal computer maker's desktops will only feature the two icons, he said.

``This is all about offering customers choice and flexibility in Internet services,'' Sievert said. ``These changes are being precipitated by the launch of XP.''

Previously, MSN was featured on Compaq's desktops along with other services.

Microsoft insisted it wanted a clean desktop with XP, free of icons except for its Internet Explorer.

A June ruling by U.S. Court of Appeals in Washington, D.C., however, determined that the plan would have been illegal since it prohibited manufacturers from adding shortcuts to competing products.

Microsoft chief executive Steve Ballmer said earlier this month that in light of the ruling, Microsoft will allow greater flexibility and allow manufacturers to remove its Internet Explorer icon.

``When Microsoft announced that it was going to reopen that flexibility to the manufacturers, we certainly wanted to move on that,'' AOL spokeswoman Kathy McKiernan said this week.

Microsoft said AOL, part of New York-based media giant AOL Time Warner Inc., is using the agreements to try to push Microsoft's competing products off the desktop.

During a conference call Friday, Microsoft group vice president Jim Allchin said that Compaq's plan is a way of ``hiding features from consumers.''

``I don't think it's a good thing for consumers and I don't think it's a good thing for the industry,'' Allchin said.

AOL, with more than 30 million subscribers, is by far the world's largest Internet service provider. But Microsoft's MSN service has been making steady gains in recent months, taking advantage of AOL's decision in May to increase prices by 9 percent.

Microsoft announced Thursday that MSN now has 6.5 million subscribers, an increase of 1.5 million in less than two months.
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