Microsoft, AOL Each Announce New Web Software, but Market Hardly Notices - TheStreet

In what amounted to a simultaneous attempt to steal each other's thunder, the world's largest software company and the world's largest Internet service provider each introduced Wednesday new packages of -- what else? -- Internet software.

Microsoft

(MSFT) - Get Report

presented

MSN Explorer,

a browser-plus-portal hybrid with content and email to boot, complete with a $150 million, year-long advertising campaign. The company is spending $1 billion for a global marketing campaign for MSN that includes partnerships and channel rebates. The campaign begins tonight and is tentatively scheduled to last a year. Meanwhile,

America Online

(AOL)

"announced the launch" of AOL 6.0, the latest version of its software, and of two new services.

Neither company's stock showed much reaction to the announcements. Analysts who follow Microsoft basically yawned because MSN is a small part of Microsoft in terms of revenue, while AOL analysts had a similar reaction because the software was not very exciting and because the company's planned merger with

Time Warner

(TWX)

effectively dwarfs the relevance of incremental software upgrades.

But the fight clearly matters to both companies. AOL, which claims 25 million subscribers to its Internet service, seemingly would have little to fear from MSN, which claims about 3.5 million. Still, Microsoft last month began hyping the software it eventually introduced Wednesday as an onslaught against AOL.

The rivalry dates back years. AOL owns

Netscape

, the browser Microsoft stood accused of attempting to unfairly drive out of business.

Internet Explorer, the browser wrapped into this new MSN Explorer, played a prominent role in the government's antitrust case against Microsoft, in which the

Department of Justice

accusing the company of bullying computer makers into including the browser with the ubiquitous Windows operating system.

Microsoft issued a news release Wednesday, aimed at investors and financial journalists, touting the advertising campaign and leading thusly: "The MSN network of Internet services today announced the most aggressive worldwide marketing campaign since the Windows 95 operating system launch."

AOL made few substantive changes to its software and instead sought to emphasize a new Web site and phone service intended "to help AOL members better manage their daily lives through multiple 'AOL Anywhere' initiatives."

In other words, as Microsoft makes MSN Explorer a centerpiece of its move from the personal computer to the Internet, AOL is shoring up its battle lines on the telephone and wireless access fronts.

Despite the hype, as a pure software vs. software battle, the clash drew little excitement.

"They're positioning the MSN service, their ISP service, against AOL," said Arthur Newman, an analyst for

ABN Amro

who rates AOL shares buy and does not cover Microsoft. (His firm has done underwriting for neither.) "I don't even see this as an interesting challenge."

Neither did investors. AOL's stock finished trading down $1, or 2%, at $47.02. Microsoft shares closed down 23 cents at $61.25.

"Clearly they're keying off one another here," said Christopher Shilakes, an analyst for

Merrill Lynch

who rates Microsoft accumulate, the equivalent of a buy. (Shilakes pays more attention to Microsoft's software business and does not cover AOL, which his firm includes in the Internet category followed by Henry Blodgett. Merrill Lynch has not done recent underwriting for either company.) "In terms of whether it means one or the other senses a shift in customer allegiance, it's way too early to tell."