Small Seattle firm takes on Microsoft on its turf

Scott Hillis

SEATTLE: As Microsoft Corp. gets ready to launch its newest operating system,

Windows XP, a battle is raging over how much leeway it will give computer makers

to change the look of the main screen.

Now xSides, a tiny Seattle company, is entering the fray with technology that

literally pushes Windows aside and could provide such Microsoft rivals as

Internet and media titan AOL Time Warner Inc. with valuable screen space

completely free of the software giant's influence.

Microsoft has heretofore exercised strict control over the initial start-up

screens of new computers, barring PC makers from removing icons for its

programs. For Windows XP, due on Oct. 25, the picture is muddier. Microsoft is

encouraging PC makers to ship the product with no icons at all, saying it is a

cleaner look.

Still facing pressure from the US government's antitrust lawsuit, Microsoft

recently appeared to back off somewhat from using Windows to promote its other

software, saying it would let PC companies remove icons for its Internet

Explorer Web browser.

But on Thursday the company disclosed that if PC makers do put icons on the

screen, they must include ones for Microsoft's browser, MSN Internet service and

digital media player.

New space



Icons are a key way for Microsoft and rivals to reach consumers as the companies
start rolling out a new generation of subscription services built around such

products as instant messaging, music and photography.

These fingerprint-sized screen icons are a valuable channel for signing up

customers, and with its lock on Windows, Microsoft has been the chief

gatekeeper. XSides chief executive Bob Steinberg, who as a lawyer successfully

represented another company in a lawsuit against Microsoft in 1994, says his

firm is set to change that.

While most PC software runs on top of Windows, xSides bypasses Windows to

talk directly with the hardware, Steinberg said in a recent interview. By

intercepting the video signal, xSides is able to re-size Windows - without

Windows' knowledge - so that it takes up less screen space, Steinberg said.

XSides could erase Windows entirely, but it doesn't go that far. It just

creates a new strip under the "taskbar" or down the right side of the

screen, where open programs are displayed. XSides can then add things to the

new, non-Windows space: advertisements, icons, or even full-blown applications

like instant messaging and e-mail, Steinberg said.

"It enables us to put anything we want underneath the taskbar. Windows

has no idea it is where it is now because we take over the cursor, the keyboard,

the so-called mouse events, and that allows us to be outside of the control of

Windows," Steinberg said.

Browsers and other Windows-based programs can be launched from within the

xSides space, completely out of Windows' control, Steinberg said. "XSides

provides a thing now to sort of level the playing field," Steinberg said. A

Microsoft spokesman said he was aware of the company but was not familiar with

its products and therefore could not immediately comment.

Attention AOL, PC makers



Analysts say xSides could be an attractive partner for AOL as it seeks to grab
consumers' attention. Such speculation was fueled in May when technology Web

site BetaNews published an internal AOL memo that detailed ways to ensure its

services win a place on new PCs with Windows XP.

No. 4 on the list read: "Replace the default desktop. Partner with an

OEM to replace the default desktop environment and default Microsoft

functionality with a custom solution (e.g., xSides)." OEM, or original

equipment manufacturer, refers to computer makers.

xSides says it has several customers and backers, including communications

chip company Broadcom Corp. , but Steinberg would not say if he was working with

or courting AOL. Asked if AOL was working with xSides, AOL spokesman John

Buckley said, "The linkage has been because of that memo. I do not know of

any kind of an actual relationship with them."

But analysts said AOL was almost certain to have at least talked to xSides.

"I believe very strongly in the possibility of a strategic partnership or

even a straight-out acquisition of xSides by AOL," said David Smith, an

analyst with the Gartner Group.

"That would give them the ability to take over part of the screen where

Microsoft has no control," Smith said.

xSides could also partner with PC makers that, in a time of falling prices

and profit margins, could shelve their fear of irritating Microsoft and install

xSides and rent out the extra space to Microsoft rivals.

"The PC manufacturers frankly are likely to be a little nervous about

going this route. But all it will take is one and the others will realize here's

how to maximize your margin opportunity," said Chris Le Tocq, an analyst

with Guernsey Research.

Several other companies make software that modifies the look of Windows,

letting users customize the screen with new icons and themes. WindowsX by

Stardock and Talisman by Lighttek Software are examples of these products.

However, these programs run on top of Windows to create a new Windows

"shell" whereas xSides doesn't interact with Windows at all.

Another potential area of competition is with so-called corporate portals,

which are gaining popularity with companies that want employees to have the same

program and information.

These corporate portals also change the look of the desktop to fit each

company's needs, piecing together the most useful programs in a new interface.

Computing heavyweights such as International Business Machines Corp., Oracle

Corp. and Microsoft are pursuing corporate portal customers.

No stranger to fighting Microsoft



Steinberg is no stranger to taking on the world's biggest software company.

As a lawyer, in 1994 he won a $120 million verdict against Microsoft for Stac

Electronics, now Previo Inc. , which charged the software giant infringed its

technology. Microsoft ended up paying $40 million in cash and investing $40

million in Stac.

"There is a lot of voltage when you're fighting Microsoft. It was the

most exciting period of my life," Steinberg said. Apart from taking on

Microsoft, xSides and its 80 employees have their work cut out for them.

(C) Reuters Limited 2001.