The news sent Netscape shares rocketing 10 to a close of $39.25.

AOL stock also shot up, soaring 8 3/8 to $83.75 — a price that reflected a two-for-one stock split that was announced last month. The split was the fifth for AOL shares since the company went public six years ago.

Netscape, which reports earnings Monday, declined to comment on a possible deal, reported in The Wall Street Journal. AOL also declined to comment.

For Netscape, the possibility of a partnership would expand on the company's existing distribution deal with the online company. AOL's Digital City regional guide is on Netscape's Netcenter Web site.

Netscape also uses AOL's Instant Messenger software, which allows users to signal other members on the Internet.

Analysts said the partnership would give the lead to Netscape in the neck-and-neck browser race with Microsoft.

"It's a valuable land grab," said Patrick Keane, a senior tech analyst at Jupiter Commications. "This is a business of real estate."

The rumored partnership would strike at the heart of Microsoft's Internet strategy, since AOL — which claims more than 14 million subscribers — bundles Microsoft's Web browser Internet Explorer with every copy of AOL software.

For Microsoft, AOL represents the software giant's most lucrative Internet software distribution outlet, other than its operating system software.

Various versions of Windows software runs on more than 90% of the world's PCs and comes bundled with a copy of Microsoft's browser, Internet Explorer.

After Microsoft decided to add its browser into Windows 95, arch rival Netscape saw its estimated 80% marketshare plummet in 1996.

The decision to integrate the Web browser into the operating system provided grist to trust-buster mills and led to the Justice Department and 20 states to launch a massive antitrust suit against Microsoft.

In the ongoing trial, AOL high-ranking executive David Colburn testified AOL chose Microsoft as its exclusive browser to secure a spot on Windows operating system's desktop.

If true, it would bolster the government's argument that Microsoft had used its monopoly in one arena to kill competitors in another.

However, AOL's exclusive contract with Microsoft ends Jan. 1.

Besieged by the anti-trust suit and escalating competition in other arenas such as multimedia, some industry watchers are beginning to proclaim the end of Microsoft's alleged choke-hold on the industry.

"A lot of people are looking at Microsoft's strength and hegemony being questioned today," Keane said.

Other industry watchers have gone as far as declaring the beginning of the end.

This month's Wired magazine splashed a grim-faced Bill Gates on its cover with a headline: "83 Reasons Why Bill Gates' Reign Is Over."

-- Ken Li - 11/19/98