AOL blocks AT&T WorldNet instant messages

Washington--PurchasePro.com and shareholders filed with the Securities and Exchange Commission to sell 3 million common shares, worth about $496 million at today's closing price.

PurchasePro.com runs Internet marketplaces where luxury hotels, sports teams and other businesses buy various products and services. Chief executive Charles Johnson may buy $5 million worth of the shares offered through the stock sale, according to the SEC filing.

The Las Vegas, Nev., company will offer 2 million shares and stockholders will offer 1 million shares through an underwriting group led by Prudential Securities. The number of shares outstanding will increase by 7.1 percent to 30.1 million, based on details in the filing.

PurchasePro.com went public in September, initially selling shares for $12 each. Since then, its shares have risen more than thirteenfold. Today the shares rose 15.31 to close at 165.38

At that price, PurchasePro.com would get about $331 million before expenses for the 2 million shares it plans to sell. The proceeds will be used to expand its sales and marketing activities, for working capital and other general corporate purposes.

The company said it won't receive proceeds from the sale of shares by current shareholders. PurchasePro.com's filing didn't identify shareholders that plan to sell stock

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Sun Microsystems and Inktomi both took minority stakes today in Digital Island, a company that uses both Sun and Inktomi products to host company Web sites and e-commerce operations.

As part of the deal, Digital Island will use up to 5,000 Sun Netra t1 "Flapjack" servers as well as some Enterprise 420 servers in the next three years, the companies said.

The servers will run Inktomi's Traffic Server and Content Delivery software, which helps spread information across the Internet so that Web services are delivered more quickly to people requesting information over the Net.

The deal is an expansion of existing relationships with Sun and Inktomi.

The computers will power Digital Island hubs in 350 metropolitan areas, 250 of which are located outside the United States. Digital Island's services are intended to give companies the ability to quickly spread e-commerce operations across the world.

Digital Island also will use software from Sandpiper Networks, a company Digital Island acquired in October. The Sandpiper software redirects Internet traffic to least-burdened servers to eliminate congestion.

Inktomi began selling Traffic Server packaged with Sun's Solaris operating system in October.

Digital Island's stock leapt up 45.31 to 114.94 today.

As AT&T prepared to link its customers to America Online's instant messaging service this morning, AOL fired off an instant message of its own: hands off.

Following through on a vow to bar rivals from accessing its AOL Instant Messenger (AIM) member lists, AOL today began disconnecting AT&T customers from AIM just hours after AT&T released a product built to connect with AOL's huge installed base.

Tribal Voice, which provides AT&T's I M Here messaging software, said AOL started rejecting registration requests from AT&T users at 10 a.m., five hours after AT&T's WorldNet Internet service first made the product available on its Web site.

Ma Bell confirmed that AOL began blocking its users from AIM this morning, as it did with Microsoft and its MSN Messenger software this summer. But AT&T said it hasn't yet determined a response.

"At this point I don't know what we would do," AT&T spokesman Ritch Blasi said. "We don't want to go through the same thing Microsoft went through."

Despite warning signs, AT&T executives had been hopeful AOL would cooperate, especially given the online leader's recent push for so-called open access to cable networks.

AOL did not return several requests for comment.

Instant messaging, made popular by AOL, allows users to communicate with friends and family in a real-time chat format. AOL has dominated the niche by maintaining 45 million screen names in its AIM "Buddy List" network and an additional 40 million registrations in ICQ, the instant messaging software it acquired last year.

Although today's move by AOL was expected, it sends another clear message that the company will not quietly let go of its enormous lead in the IM market by freely giving users of competing products access to its system.

It is a position that has put the company at odds with efforts to establish an IM standard and with consumers who could reap major benefits from interoperability. Although AOL has said it supports open standards and has published its source code, it has refused to open its network to all comers. It battled Microsoft to a standstill over the issue, forcing the software giant to back off just last month.

AT&T's arrival on the battleground could make it more difficult for AOL to refuse access to competitors over the long haul, analysts said. But with its huge base of users, the company faces no immediate pressure to capitulate.

"AT&T is no slouch," said Rob Enderle, an analyst with Giga Information Group. "But even now, [AOL's competitors] don't have enough of an installed base."

Joe Lazslo, an analyst with Jupiter Communications, agreed.

"In the long term, this is a blow to AOL," he said. "But for now it doesn't give users much incentive to switch."

The move by AT&T is an attempt to give the company and its 1.8 million AT&T WorldNet customers access to the millions of users on the AIM and ICQ systems. Providing access to AOL's audience for the roughly 50 percent of its customers who use the AT&T I M Here service would be a competitive advantage.

Blasi said the company recognizes instant messaging as one of the fastest-growing areas in communications, and it wants to be competitive in that market. Like many messaging products, AT&T's supports voice chatting, a market that could grow as voice-over-Internet protocol technologies improve.

AT&T has been embracing open Internet policies. Earlier this week the company struck a deal on principles for providing unaffiliated ISPs, namely MindSpring Enterprises, access to its cable modem network.

Microsoft also has embraced openness, at least on the IM front.

The software giant worked closely with Tribal Voice to create interoperability with the new version of AT&T's I M Here and Tribal Voice's underlying PowWow IM product. Not including AT&T customers, Tribal Voice pegs its installed base at about 5 million, including distribution through a partnership inked in the fall with British ISP Freeserve.

What Tribal Voice and others have considered steps toward opening channels of communication, however, AOL has criticized their moves as unauthorized attempts to access its servers.

"We will block [interoperability with Tribal Voice] because it's unauthorized access to our servers that jeopardizes member security and privacy," Tricia Primrose, an AOL spokeswoman, said when the Freeserve deal was announced in September.

Having fended off one powerful opponent in Microsoft, AOL appears to believe it can do so again, analysts said.

"AOL is extremely confident right now," said Giga's Enderle, who added that the company can stand a lot more pressure in the short run, even as more competitors line up alongside AT&T and Microsoft in the coming months.

"But in the long term that might backfire," he cautioned, suggesting that the company's practices might lead to antitrust scrutiny, similar to charges against Microsoft.

"The big exposure is that they will be called to task for their behavior…They might be next on the list for government intervention," Enderle said.

News.com's Corey Grice contributed to this report.