AOL has laid off 50 Netscape software developers, and announced plans to end its Mozilla development work.

To ease the blow AOL has pledged $2 million in cash over two years to a new foundation, created by people behind the open source Mozilla project, the core of the Netscape browser.

The Mozilla Foundation will build, support and promote Mozilla products. The cash will be used to pay about ten software developers and other foundation expenses.

Mozilla was started in early 1998 by Netscape Communications, which AOL acquired later that year. AOL has been supporting Mozilla development since.

AOL spokesman Andrew Weinstein denied that the final hour has come for the Netscape browser: "We will continue to support the Netscape browser and Netscape remains a part of our multibrand strategy," he said.

As part of the funding deal with AOL, several Mozilla developers at AOL will move to the new foundation. AOL will also give the foundation equipment, domain names and trade marks associated with Mozilla, the foundation said in a statement.

Analysts are not optimistic for the future of Netscape: "I would not say the patient is dead, but certainly it is more zombie-like. I don't see a new version of the Netscape browser coming out anytime soon," said Jonathan Gaw, research manager at IDC.

Geoff Johnston, vice president for StatMarket, agreed: "It sounds like AOL is really throwing in the towel. I think we have seen our last version of Netscape," he said.

The last major release of the Netscape browser and associated software was in August 2002 with version 7.0. However, most Netscape users never upgraded past version 4.7, according to Johnston.

Netscape was the most popular browser in the early years of the Web. However, its market share started crumbling when Microsoft introduced Internet Explorer in the mid-1990s. The acquisition of Netscape by Microsoft rival AOL in late 1998 and a lengthy antitrust trial could not change the browser's fortune.

AOL's concession to Microsoft in the browser space was really already clear when it negotiated a seven-year, royalty-free license to use Internet Explorer with its AOL client software as part of a lawsuit settlement with Microsoft in May, Johnston said. "That is when AOL conceded the war, surrendered to Microsoft and turned things over," he said.