AOL Sends Wireless Message

With its acquisition of Tegic, AOL might be sending a message indicating its long-term vision: convergence on our terms.

"The AOL-Tegic deal is further evidence that wireless devices of all classes are perceived as critical battlegrounds in the fight for mind share and market share among content owners," said David Kerr, Strategic Analytics vice president.

Tegic is best known for its T9 predictive word-support software, which reduces the number of keystrokes necessary to enter a letter on a phone keypad. For example, although pressing the 5 key can produce the letters J, K or L, the T9 software uses an internal linguistic database, compatible with 14 languages, to determine the most likely letter. Entering the word "call," for example, requires only four keystrokes instead of a conventional system's 10, according to Tegic.

Making message composition on wireless devices a less cumbersome process is attractive to AOL, whose customers send more than 10 million instant messages every hour via its ICQ messaging program, according to the company. AOL said that purchasing Tegic will enhance its efforts to make AOL even more ubiquitous under its AOL Anywhere strategy, which aims to expand its market beyond PCs into PCS and elsewhere. Although terms of the purchase weren't disclosed, Tegic will retain its name and management structure and will operate as an independent business unit within the AOL Device Group.

T9 also alerts users whenever others on their AOL "buddy lists" activate their phones or log on-line. AOL has been working with Tegic on the embedded application bundled with the T9 software for more than a year. Tegic expects to see T9 incorporated into a wide range of devices, including pagers and interactive TVs. Incorporating it into a TV remote, for example, would eliminate the need for a full QWERTY keyboard.

T9 is licensed to more than 20 handset vendors, including Ericsson, Nokia, Panasonic and even Motorola, whose just-released iTAP software competes with T9. T9 will be in some 10 million phones this year, while iTAP isn't due in the United States until around 2Q00.

AOL and Microsoft have locked horns over wireline messaging before, and with T9, AOL owns a potentially key tool for furthering its AOL Anywhere strategy. It's unclear whether Microsoft might throw its support behind iTAP. Last May, Microsoft invested $600 million in Nextel "in support of Nextel's leading position in the development and deployment of wireless Internet services." One possible strategy: getting iTAP on Nextel's iDEN phones, which already provide access to Microsoft's MSN portal.

"(Motorola) might pick somebody like (MSN) that is a really viable alternative to AOL," said Ken Hyers, Cahner's In-Stat Group industry analyst. "Anything to help promote the product because iTAP is still sort of the quiet one of the two. In fact, I think to increase the visibility automatically, they need to put (iTAP) in all of Motorola's phones."