Sources close to the negotiations have warned that the pair may not reach an agreement in time to complete the process before Windows XP hits the streets. Both companies also have rival media players. Discussions, already said to have been broken off once, are yet to involve senior executives and there are substantial differences, sources said. The problems are exacerbated because any eventual agreement may not be signed in time to be worked into Microsoft's development schedule. Windows XP is slated to launch on 25 October and beta testing time is running out, with the first release candidate due later this month.
Analysts disagree on the implications of a breakdown in talks for the two companies and the public.
Merrill Lynch analyst Henry Blodget said that bundling further technologies would be a more aggressive move by Microsoft than its decision to bundle its Internet Explorer web browser with Windows, which triggered its legal fight with the US government. Other analysts, however, have said that AOL was unlikely to pursue antitrust claims because of its own dominant position. Even more diverse positions have been adopted on how a failure to renew the agreement may affect consumers. Microsoft and AOL will find a way to work within each other's platforms. Smith explained that, while most of the time AOL and Microsoft do not compete, the impending launch of Windows XP and Microsoft's ambitious HailStorm initiative, which establishes a secure online identity for users that is necessary to support for-pay web services, took Microsoft into AOL's territory.