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updated 12/30/2004 8:38:19 AM ET 2004-12-30T13:38:19

Microsoft is abandoning one of its most contentious attempts to dominate the Internet after rival technology companies banded together in opposition and consumers failed to embrace it.

The world's biggest software company said Wednesday that it would stop trying to persuade Web sites to use its Passport service, which stores consumers' credit card and other information as they surf from place to place. (MSNBC is a Microsoft-NBC joint venture.)

The acknowledgment came after eBay Inc. posted a notice on its site Wednesday, saying it would stop using Passport in late January and rely on its own service.

EBay had been the most visible supporter of Passport and was among the first companies to adopt it — with great fanfare — in 2001.

Another early backer, Monster Worldwide Inc.'s job-hunting site, Monster.com, dropped Passport in October.

Passport probably drew few new customers to Microsoft products. But it was initially seen as strategically important because it could have helped the Redmond, Wash.-based company put itself in the middle of most electronic transactions.

Because it would keep track of credit card numbers and passwords as people moved from Web site to Web site, Microsoft had predicted that Passport would smooth the way for widespread use of Web services based on a person's identity instead of those linked to information stored on a specific PC.

At one time or another, Passport attracted the ire of privacy advocates, trade regulators on two continents and technology security experts, who in 2003 found a hole that could have led to massive identity theft.

As for major merchants, they were concerned about letting Microsoft stand between them and their customers. They feared that the company that controlled more than 90% of the world's desktop computers might one day charge a toll on e-commerce transactions.

In the end, Passport may have been doomed by old-fashioned competition. Soon after Microsoft unveiled it, a consortium of companies, including Sony Corp., Hewlett-Packard Co. and Sun Microsystems Inc., formed the Liberty Alliance. It issued guidelines for online customer authentication services, which encouraged the development of Passport rivals.

When San Jose-based EBay was a big Passport supporter, Microsoft liked to tout eBay's use of a related Microsoft service that alerted users when they were outbid in EBay auctions.

But "a pretty small percentage of EBay users regularly signed in using Passport," said EBay spokesman Hani Durzy.

Adam Sohn, marketing director for Microsoft MSN Internet services, said the pullback was driven by Microsoft's decision to focus on building tools that other companies could use to create their own Internet programs, instead of offering the programs itself. Microsoft has been working with many competing firms to develop standards for Web services. In April, it settled bitter litigation with Sun, promising more collaboration.

"Rather than have a divergent approach, it made sense to have it convergent," Sohn said.

With more than 200 million users, Passport will continue to be the method for logging on to some Microsoft-owned services, including the free Hotmail e-mail system.

This article appears by special arrangement with the Los Angeles Times.

Copyright The Financial Times Ltd. All rights reserved.

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