AOL, Microsoft software talks tank

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America Online and Microsoft have reached an impasse in talks to include AOL software on Microsoft's new operating system debuting this fall, The Wall Street Journal reports.

The talks broke down Friday without the two sides reaching an agreement as representatives of Microsoft and AOL were trying to meet a deadline to strike a new deal to include America Online software in Windows XP. Meanwhile, Microsoft is planning enhancements to its software that AOL sees as anticompetitive. So AOL is lobbying government regulators against many of the new features, including an instant-messaging service that Microsoft wants to tie directly to Windows.

AOL and other Microsoft rivals also don't like the fact that Windows XP discourages use of desktop icons, which could make third-party services harder to find.

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