Alliance just the first of many? Others may follow eBay to Microsoft

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Yesterday's announcement that Microsoft and online auctioneer eBay will share technology and link their Web pages may be the first of several high-profile alliances for Microsoft this year as the company shifts its Internet strategy into high gear.

Analysts said the deal is a key endorsement of Microsoft's vision for the next-generation Internet and comes as the company is trying to convince software developers to share that vision, which it calls ".Net."

They also said Microsoft is well-positioned to make more deals because it has cash at a time when it's getting harder for smaller companies to raise capital. As of Dec. 31, it had $26.8 billion in cash and short-term investments.

Companies may also be jockeying for position as Microsoft decides who will get the best real estate on the desktop of its upcoming Windows XP operating system, early versions of which have buttons linking consumers to retail services.

Microsoft hasn't yet decided how those buttons will be assigned, but CEO Steve Ballmer said eBay will be easy to reach.

"When you log in, if you will, to Windows XP system, you're going to be logged into eBay," he said. "You can also be logged into any other Web site that wants to support .Net, but eBay is really getting out and being a leader on this next generation of the Internet."

Microsoft drew scrutiny for promoting its partners with icons on the Windows 95 desktop, but it scaled back the approach in 1998 as government attorneys were trying to broaden their antitrust case against the company. Yesterday a product manager said WindowsXP will have the infrastructure for such links but the desktop features won't be finalized until later this year.

Financial terms of the eBay deal were not disclosed, but the companies described several ways they'll work together:

• eBay will use the programming language that's the foundation of Microsoft's .Net vision in its technology standards.
• eBay will be integrated into Microsoft Web sites.
• eBay will adopt Microsoft's password system, Passport.
• eBay will upgrade its front-end computers to use Microsoft Windows 2000. But it will continue using Sun Microsystems servers under a deal made with the Microsoft rival last year.

Meg Whitman, chief executive officer of San Jose-based eBay, said the deal brings eBay to new Web sites and .Net will make it available on devices such as wireless phones, pagers and TVs.

Last month eBay's Web pages had 15.5 million visitors out of 19.9 million people who visited all auction sites combined, according to Media Metrix.

Mark Anderson, a Friday Harbor publisher of an online technology newsletter, said further alliances are likely as Microsoft adds more popular services to its software and Web pages.

Analyst Scott McAdams, CEO of McAdams Wright Ragen in Seattle, said the eBay deal benefits both companies but it's "probably not material for earnings."