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Technology > Tech Investor
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Apple's New Gig
By getting AOL to open up IM, Apple succeeds where Microsoft has failed.
May 15, 2002: 7:28 PM EDT
By Eric Hellweg, CNN/Money Contributing Columnist

NEW YORK (CNN/Money) - When fans of Apple computers want a way to describe the company, they race to Dictionary.com and pull up the first definition of the word "exemplary": "Worthy of imitation; commendable."

When high-tech companies find themselves facing allegations that they're averse to competition, they point to Apple and cite "exemplary's" third definition: "Serving as an illustration."

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For example, Microsoft (MSFT: Research, Estimates) points to the Cupertino, Calif., company when it needs to convince a judge that it has competition in the operating systems market. And now AOL (AOL: Research, Estimates) (the parent corporation of CNN/Money) can point to Apple when it hears complaints that it doesn't allow interoperability with its instant messaging platform.

On May 6, at Apple's Worldwide Developers Conference in San Jose, the company unveiled its latest version of OS X, code-named Jaguar. The operating system, scheduled to be released in late summer, comes with a notable new feature -- iChat, a colorful online chat tool that is one of the first to gain access to AOL's hallowed instant messaging servers.

While AOL has licensed its IM technology to Motorola (MOT: Research, Estimates), for cell-phone usage, and to ISPs such as EarthLink, the Apple iChat deal marks the first time a company has been invited into AOL's network to be hosted on AOL's servers. "It's an important first for us," says Marty Gordon, an AOL spokesperson.

Microsoft -- which famously tried to gain interoperability between its own MSN Messenger product and AOL's chat software a couple of years ago (and was turned down) -- was none too pleased with the announcement. "Looks like AOL is picking out another weak stepsister to interoperate with," says Bob Visse, director of MSN, whose comment will no doubt earn him the enduring affection of the Apple faithful.

So what was it about Apple that got it past AOL's instant messaging curtains? Phil Schiller, senior vice president for worldwide product marketing at Apple, eagerly fields that softball question, explaining, "We brought the ability to make some great software, and we have a tremendous, loyal customer following. Our users are the most Web-literate and cutting-edge customers."

"They're great partners," AOL's Gordon says, gamely returning the lob. "They rolled up their sleeves and created a great product."

There's actually some truth amidst the marketing love-fest. The iChat program is classic Apple: It looks cool (user-selected photos use dialog bubbles to converse) and it effortlessly brings technological improvements to consumers. iChat automatically detects other iChat members connected to a network and sets up ad hoc "buddy lists." There's also a bit of history: When AOL first launched its chat service back in 1989 -- before it was even called AOL -- the program ran on Apple 2 and Macintosh machines only.

But some believe that the reasoning behind Apple's coup has more to do with Visse's comments (minus the venom) than with whiz-bang technology. "It represents a big win for Apple and the Mac platform," says Michael Gartenberg, a research director at Jupiter Media Metrix (JMXI). "But Apple doesn't represent a threat to AOL's business. Apple isn't a media company; it's not in online services. It's not the same threat as when Microsoft wanted interoperability."

For now, Apple (AAPL: Research, Estimates) can play up its first-mover advantage (while it lasts) to try to woo developers and users to OS X -- an important upgrade for the company's future as well as its short-term financials. To ease the transition, Apple is smartly touting its chat networks for business uses, as IM becomes more popular within corporations as a business tool. Apple is also promising improved networking between Windows and OS X -- something that, combined with the ease of installation, should get the attention of corporate IT heads.

Though it won't happen overnight, most see interoperability between the three leading chat programs (AOL, MSN, and Yahoo (YHOO) -- AOL is the leader, with 150 million users) as inevitable -- if thorny issues like maintaining control over buddy lists can be worked out. For his part, Microsoft's Visse is ready to do some AOL chatting of his own. "Any time AOL wants to interoperate with MSN, our door is open."


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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.