Microsoft Corp. recently held a secret Webcast with some of its closest partners to discuss ways in which the company might improve its Internet Explorer browser and customer confidence in the platform.

Sources said Microsoft officials discussed potential "fixes" to IE as the company is losing market share to other browsers, such as the open-source Firefox. Though the strategy is still in its initial phases, Microsoft is looking to resolve some fundamental issues with IE's operating system.

Officials for the Redmond, Wash., company said they will not upgrade the browser before the next release of Windows, dubbed Longhorn, which will only increase pressure from Firefox and further erode confidence due to security issues, sources said.

But because Microsoft has made the browser inextricably integrated with Windows, any upgrades will likely have to be delivered through a service pack update to the operating system, which is something Microsoft said probably won't happen. The company is looking at whether service packs might be viable, sources said.

"It has now been seven months since Firefox emerged as a real threat, and [Microsoft has] done nothing but issue ad hoc patches for individual holes," said Eric Raymond, an open-source software advocate and consultant in Malvern, Pa. "There will be no IE 7 until Longhorn, which isn't scheduled for general availability until 2006 and will probably slip further."

eWEEK Labs says Firefox 1.0 lives up to its hype. Click here to read the Labs' review.

According to WebSideStory Inc., a San Diego Web analytics company, IE holds about 92 percent of the market and Firefox 5 percent, while some analysts show Firefox having as much as 20 percent of the market. One way Microsoft will respond is by promoting the development of smart-client applications, which give users the benefit of a blended Web- and rich-client model that focuses on local resources and user interfaces and can be used online or offline.

At the in San Francisco last week, S. Somasegar, corporate vice president of Microsoft's Developer Division, said smart clients "take the best of Web clients and rich clients and bring them together." Somasegar made smart clients a major theme of his keynote address at the show.

Smart clients indicate Microsoft is de-emphasizing the browser and shifting the battles between .Net and Java and between IE and other browsers back to Microsoft's strength: Windows.

"Smart clients are going to make so much headway because its competition is so lame," said one source. Microsoft is betting that if smart clients catch on, the battle on the browser front will not matter so much, sources said.

A national ISP is offering Firefox to its customers. Click here to read more.

Others are not so sure.

Microsoft is "playing to their strength, a smart move from their perspective, but from the customer perspective, the ubiquity of the Net is strong," said Yaacov Cohen, president and CEO of Mainsoft Corp., of San Jose, Calif. "We should spend more time making the Web better. It is like saying there are too many accidents on the roads with cars, so let's go back to riding donkeys." Microsoft officials would not comment for this story.

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