AOL nears deal to buy Israeli 'chat' firm

America Online Inc. is close to making one of its largest acquisitions to date, an Israeli company that has developed popular software enabling people to conduct typed "chat" over the Internet, sources familiar with the negotiations said yesterday.

The Dulles-based consumer online service would pay about $300 million in cash and stock for Mirabilis Ltd. of Tel Aviv, the sources said. Final agreement on the deal could be reached by the end of the month, they said.

As it seeks to solidify its position as the country's largest online services company, AOL has selectively been buying technology firms. Its biggest acquisition to date was of the 2.6 million subscribers of rival CompuServe Inc.

On its own service, AOL already offers chat, in which people type brief messages to one another in "real time," without the delays common with electronic mail. The pending acquisition would help the company expand its chat offerings on its World Wide Web site, where AOL is trying to better compete with other providers of news, entertainment and "search" services on the global network. Those providers include companies such as Yahoo Inc., Microsoft Corp., Netscape Communications Corp. and Excite Inc.

All those firms are seeking to become "portals" through which Web users find basic information, chat with one another and then head off to other sites. The firms intend to make money on these sites by displaying online advertisements.

Mirabilis makes software called ICQ -- computer lingo for "I seek you" -- which allows users to exchange text messages and files over the Internet.

AOL offers a version of its "instant messenger" chat software on the Internet, but some industry analysts and many Web users say ICQ has more capabilities. Mirabilis also hosts scores of chat rooms on topics as diverse as leather working, heavy-metal music and bobsledding.

Even though the company has eschewed advertising, referrals have led more than 11 million Internet users to download free copies of the Mirabilis' software, the company says. It says that more than 3 million people use its software daily.

AOL likely would retain the ICQ brand, but the company would place online ads on the service and feature it on the AOL Web site, the sources said. AOL executives realize that slapping their logo on the ICQ service could alienate many of ICQ's existing users, who see themselves as more technically adept than the typical AOL subscriber.

The negotiations were first reported in Tuesday's editions of Globes, an Israeli business publication. An AOL spokeswoman declined to comment yesterday, and executives at Mirabilis could not be reached by telephone.

Mirabilis has about 65 employees, most of them in Tel Aviv. The company has a small office in New York where the computers that operate its service are located. The company, founded by four computer programmers in their twenties, has been quietly approaching other firms over the past two months expressing interest in being acquired.

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