RealNames to shut down, Microsoft deal scuttled

SAN FRANCISCO, May 13 Reuters reported that the president and chief executive of RealNames Corp said on Monday his company is shutting down because Microsoft Corp has refused to renew a contract to use RealNames technology in the Internet Explorer browser to allow people to find Web sites using simple words instead of long Web addresses.

As a result, Redwood City, California-based RealNames fired all of its approximately 80 employees last week, but then rehired about 15 of them on a short-term basis to help customers to sell the assets of the company, said Keith Teare, RealNames founder.

"We do not currently intend to file for Chapter 11," he said, adding that RealNames is talking to domain name provider VeriSign Inc which owns 10 percent of the company. Microsoft owns about 20 percent of RealNames, he said.

Microsoft was ending its partnership with RealNames because the software giant can't have control over the keyword infrastructure and thus the profits, whereas they control the Internet Explorer browser, Teare said.

"There's no way Microsoft could control which keyword was sold to whom," he said. "Microsoft does control 100 percent of the revenue that comes through their search engine ... They wanted the browser back, to be 100 percent their own environment."

A Microsoft spokesman said the company decided not to renew the contract because it was disappointed with RealNames keyword results for generic terms and some of them were not relevant.

"It became difficult for Microsoft to provide a good user experience under the keyword system because people weren't getting intuitive results in many cases," said Matt Pilla of Microsoft.

RealNames allows Internet Explorer users to type simple words in the browser instead of Web addresses. For example, typing in "Ford" will take a Web surfer directly to the Ford Motor Co Web site. AOL Time Warner Inc offers a competing keyword technology for its users.

SWITCHING WHOLE LANGUAGES OFF

Under a partnership with Mountain View, California-based VeriSign, registrars can resell keywords to work through the Internet Explorer browser. RealNames has other distributors, and provides access to Web addresses through languages other than English.

"In China, the only way to use Chinese through a browser is through RealNames, same in Japan," said Teare. "So when they switch this service off they're going to be switching whole languages off."

The RealNames technology will stop operating in Internet Explorer on June 30, Teare said. The original two-year contract, reached in March 2000, called for Microsoft to take an $80 million equity stake in RealNames and receive a $40 million revenue guarantee, according to Teare.

Microsoft refused to discuss terms of the initial deal.

In more recent talks, Microsoft rejected Teare's offer to pay some money up front and percentages of revenue in order to maintain the deal, Teare said.

Although RealNames still owes about $25 million to Microsoft, Teare said, Microsoft has made it clear that money is not the issue. "They're withdrawing from any shared infrastructure space. If they don't own it and can't control it they're not interested," he said.

VeriSign spokeswoman Cheryl Regan said the closing of RealNames was "regrettable," and said she didn't know of any talks between the two companies about RealNames' sale of its assets and infrastructure.

However, VeriSign is looking at alternatives to keep the international domain name resolution services up and running, she said, declining to elaborate.

TRYING TO LAND GRAB

Meanwhile, Teare said Microsoft is already "trying to land grab" by linking its own Web sites to certain generic keywords.

For instance, he said typing in "cars" takes a Internet Explorer browser to Microsoft's CarPoint Web site.

And he accused Redmond, Washington-based Microsoft of trying to develop its own version of keywords.

Pilla denied that and said Microsoft owns more than 20 generic keywords and isn't planning on adding more.

"We have no plans to implement a keyword service of our own at this point," he said.

There are more than 100,000 customers who have purchased or own RealNames keywords, according to Teare's Web site at http//:www.teare.com.