The following document titled 'Microsoft Response.doc' was authored on April 18, 
2001 and sent in a memo to top AOL executives. Seven key options were presented 
to deal with the threat posed by Windows XP.

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(Preliminary) Summary OEM Strategy Response to .Net/XP

The Issue

Microsoft's (MS) new .Net strategy, coupled with the impending release of XP, 
presents a significant risk to the AOL franchise.  By integrating and embedding 
traditional AOL functionality (e.g., email, IM, chat, wallet, calendar, address 
book, web browsing, content aggregation, media players, etc) into the OS and .Net 
initiative, Microsoft is essentially absorbing much of the AOL client based 
functionality into the OS.  The boundaries that separate the OS and the Internet 
will disappear.  The risk exists that the consumer will not see the value of 
using the AOL client for online activity and will simply use the default 
Microsoft solutions.  

The Current OEM Environment

MS is currently forecasting an RTM date of 7/25.  If this date is attained, 
approx. 7-10 million PC's will ship with XP this fall.  A number of OEM's have 
expressed concern regarding MS's intention to modify the OS in a manner that 
eliminates the OEM's ability to effectively monitize the Desktop.  MS's intention 
to remove all icons from the Desktop, to remove the system tray, to control the 
number of preinstalled applications on the top level of the Start menu, etcÉare 
seen as examples of this strategy.  HP and Compaq have specifically indicated 
they are interested in taking steps "remonitize" the desktop.  
 
Potential AOL Response Scenarios, in concert with the OEMs:

1)	Accept Assimilation:  Partner with Microsoft to support their initiatives 
while gaining specific "carve outs" for AOL.  This approach would not necessarily 
involve the OEMs.

2)	Make AOL the Default:  Work with the OEMs to create a "Coalition" to 
ensure AOL is the default application and service for all online activity, and 
that AOL has extensive presence throughout the OS.    

3)	Ensure AOL Properties replace Microsoft OOB:  Ensure Netscape, Magic 
Carpet, Aim, etc.. are the default applications for online activities unless the 
AOL client is registered through OOBE.

4)	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).

5)	Stall XP Deployment via OEMs:  Encourage the OEM to keep ME until AOL can 
develop an appropriate solution for XP

6)	Stall XP Adoption:  Until AOL can develop an appropriate XP solution, 
message to AOL members and the public that XP is "not ready" for broad adoption 
(i.e., has bugs, will not run AOL, will not run your existing software, will 
violate your online privacy, etcÉ)

7)	Think Different:  Partner with an OEM to develop and launch a more 
esoteric solution such as an alternative OS or a modified MS OS 

Current Minimum OEM XP Integration Goals

1)	"One Click" OOBE AOL registration to install AOL during XP registration 
and replace Microsoft default file associations
2)	Place compatible AOL XP bundle client installer on the machine
3)	Get Persistent Desktop icon presence after OOBE
4)	Start menu presence equal MSN
  	a) If client is preinstalled, establish AOL as default Internet & mail 
application
	b) If client is not preinstalled, provide OEM a shim which would set AOL 
as the default
5)	Promotion in Wizards and eCommerce destinations: My Music, My Pictures, 
Web Publishing, etcÉ
6)	Active Desktop defaulted to the off position.
7)	Netscape, AIM, Spinner & WinAmp bundled and established as defaults as 
appropriate in the OS.  AOL registration through the OOBE would override these 
defaults.
8)	Get "Designed for Microsoft Windows" logo program exemption for AOL.  
Microsoft pays the OEM significant rebates to have their software bundles 
compliant with Microsoft specifications.  The AOL client will likely not meet 
Microsoft's standards, resulting in OEM PC's being out of compliance with the 
logo program and jeopardizing the rebates.  

Specific Open Questions the MS OEM License Agreement

-  How much latitude do you have to reset defaults or the desktop/first screen in 
Windows?
-  Are you barred from making changes to the desktop after first boot?
-  Are you required to ship XP.  Can you choose to ship Windows Millennium 
instead?  If so, for
	how long
	could you continue to ship ME before you had to convert a certain 
percentage?
-  Are there requirements to carry additional Microsoft products?
-  Are there prohibitions on eliminating MS applications (like media player) in 
your licensing
	agreement?
-  Are there restrictions on carrying/bundling additional applications (like AOL, 
Real or Netscape)
	on your XP boxes?
-  Is there a schedule for service pack/upgrade release in 2002?
-  What can you do with bootup/OOBE screens?  Do you have the ability to make 
modifications to
	the default MS Welcome OOBE process flow?
-  Would integrating a product like X-Sides violate the license agreement you 
have with Microsoft?
-  Do you have any input into how the ICW is integrated into the OOBE or 
accessed/promoted
	from within the OS in general, particularly from within the UI?
-  Does MS provide incentives if the OEMs embrace .Net
-  What are the OEM concerns regarding .Net

Critical Documents Needed from the OEM

OPK - The OEM Preinstallation Kit, which would enable us to evaluate and 
integrate with OOBE. 
Current status: We were previously informed that this would be available to us 
post-Beta 2, but were just informed that this document is only available to OEMs.

Style Guide - For the new XP UI, there is supposed to be a new style/designer's 
guide. 
Current status: We were initially told this would be available at the beginning 
of March, but we have not yet received a response to recent requests for the 
document.

Web Development Specification - This is a document that OEMs & ISVs have which 
apparently documents all of the business and technical issues involved in 
integrating with the Web Publishing Wizard, Order Prints from the Internet 
wizard, etc, etc. Some of our OEMs have this document.
Current status: We have received no response to our request for a copy of this 
document.

Theme-Aware Programming - Developing applications that are "theme aware" for the 
new skinable themed UI in WinXP requires significant programming work if the 
application has any custom UI behaviors (almost all applications have some). The 
current documentation in the platform SDK is insufficient to even begin to cost 
the efforts to leverage these new UI behaviors in development. Current status: We 
have received no response to our request for more documentation on this topic.