AOL to offer Outlook alternative

America Online is testing a standalone email client that could set the stage for a features battle with Microsoft in the market for internet-based communications software.

Called 'AOL Communicator', the new software bundles a beefed-up version of AOL Instant Messenger (AIM) and an address book with an email client that mirrors Microsoft's popular Outlook application in appearance and features, according to a version of the software seen by this writer.

The software comes with an identity manager that lets a person digitally sign and encrypt emails and instant messages, a function that would likely appeal to business users. The email client also lets a person send and manage email using different accounts, by forwarding messages from POP or IMAP (internet message access protocol) email servers.

AOL spokeswoman Catherine Corre confirmed the company is developing AOL Communicator but declined to comment on specifics, as the product is at an early testing stage.

Corre said AOL Communicator will target "heavy users of AIM and advanced users of email" but would not say whether the company plans to charge for the software or whether it would be sold to companies or to AOL subscribers.

"It's a solution that's powerful and simple to use," Corre said. "It's trying to integrate AOL POP and IMAP email experiences. But I think it's premature to make any comparisons with anything."

AOL's development efforts come as Microsoft prepares to release a major upgrade to its Exchange email server software, set to launch in mid-2003. Developed under the codename Titanium, the upgrade is roughly timed to coincide with a face-lift for Microsoft's Outlook email client. The company says these moves will together provide significant advances for its email products.

Among other things, Titanium is expected to offer better security as well as integration with mobile phones and handheld devices, which should allow mobile device users to more easily access corporate email accounts and calendars.

Microsoft is also pushing new features into its Outlook client for both PC and web-based versions of the product. Among other things, the changes promise better email sorting and filtering, automatic storage and updating of key server files on end-user machines, and better bandwidth management.

The new version of Exchange, which handles email, calendars and contact lists, is the company's first major update to the product since releasing Exchange 2000 nearly two years ago. In the $1.6bn email and messaging market, Microsoft ranks first in number of users but trails IBM in revenue. Other rivals include Novell and newcomer Oracle.

Microsoft did not immediately return phone calls seeking comment.

AOL is highly protective of its email service. The flagship product inspired the company's well-known 'You've got mail' slogan, and is frequently cited as the glue that keeps its 35 million subscribers loyal to the service.

The tests for AOL Communicator come as the company seeks to right itself following a period of declining subscriber growth, dwindling ad sales and an internal audit that led the company, a division of AOL Time Warner, to recently wipe $190m in revenue from its books over questionable accounting.

Last Thursday, AOL's board met to review a plan, presented by a new management team, that aims to fix problems at the troubled unit. Details of the plan are expected to be announced on 3 December.

Key issues facing the company include the future of its dial-up internet access business, which faces increasingly credible competition from rivals such as Microsoft's MSN and is coming to grips with the arrival of high-speed net access for the home. AOL is expected to feature more proprietary content to appeal to consumers.

AOL Communicator harkens back to a similar product developed by AOL subsidiary Netscape Communications - but with some key differences. Netscape Communicator bundled its web browser with an email client, a web authoring tool and newsgroups, among other applications.

The latest version of the Netscape browser still comes packaged with some of these applications, such as an email client.

Unlike Netscape Communicator, however, AOL's new integrated email product is not browser-based. It also focuses more on having the email client collaborate with other software applications.

Microsoft has also taken steps to incorporate address book applications and instant messaging into its Outlook products. For example, the software maker has bundled Outlook functions into its MSN 8 internet service.

Many functions currently available on AOL Communicator are linked together. Instant messaging users are alerted when buddies send them emails, and users can click address book entries to immediately send emails or instant messages to contacts.

"I think it's an attempt to make sure they're competitive in terms of features with Outlook," said Rob Batchelder, president of IM Intelligence, a consulting firm for the instant messaging industry.

The new email product could be positioned as a business tool as AOL steps up its efforts to court corporations. In June, the company unveiled a new Strategic Business Solutions division that will sell AOL software to companies. The marquee product is a version of AIM that allows companies to manage internet instant messaging correspondences.

Microsoft and Yahoo! have both unveiled similar enterprise IM efforts and plan to sell these services to companies next year. The launch of all these products underscores a push to sell traditionally free software to a market that would be more likely to pay.

Although AOL wouldn't say how it plans to push AOL Communicator, the product could face a cold reception if the economy continues to limp along.

"Unless somebody was giving it away, you're not going to get a lot of takers right now because budgets are tight," said Laura DiDio, an analyst at Yankee Group.