In an unexpected move, the nonprofit Mozilla Foundation on Wednesday announced that it was creating a for-profit subsidiary, the Mozilla Corporation, in order to more rapidly increase market share for its core product, the Firefox Web browser. Though the Mozilla Corporation will seek to make a profit, that won't be the primary goal of the company, Mozilla representatives say. Instead, the new company will help the Mozilla Foundation promote the use of open Web standards.

"We've done this to respond to the success and growing market-share of Mozilla Firefox and the new opportunities this makes possible," Mozilla Corporation president Mitchell Baker noted in a blog posting describing the reorganization. "Mozilla Firefox is approaching 10 percent market share, with figures showing usage several times higher in selected groups and countries. We're reaching the point where Mozilla Firefox is becoming a significant element of the Internet experience and has growing influence within the Internet and software industries."

Because the Mozilla Corporation is a taxable entity, Baker says, it is granted greater legal freedom and can more easily interact with other corporate entities. However, the Mozilla Corporation is not designed as an investment vehicle and will not offer an IPO (initial public offering). Instead, it will continue to push the original goals of the Mozilla Foundation, albeit in a far more flexible fashion. And all profits made by the Mozilla Corporation will used to continue product development and further those goals. Put simply, the Mozilla Foundation became too successful, and basically outgrew its nonprofit status.

The new Mozilla Corporation will be based in Mountain View, California, at the same address as the Mozilla Foundation. It will have about 36 employees, compared to a handful that will remain as Mozilla Foundation employees.

According to the new company, future versions of Mozilla Firefox, the Mozilla Thunderbird email application, and other products, will remain free and be based on open source code. Firefox, in particular, has rocketed to mainstream success in recent months, and has logged over 76 million downloads since the 1.0 version was shipped late last year. According to NetApplications, Firefox grabbed 8.7 percent of the Web browser market in July and is the number two browser behind Microsoft Internet Explorer (IE), which still controls 86 percent of the market. IE is losing .5 to 1 percent of the market to Firefox each month, NetApplications says.

Firefox has been so successful, in fact, that it caused Microsoft to rethink its Web browser strategy. The original plan was for the next major Windows version, now called Windows Vista, to integrate Web browser functionality directly into the system shell and remove the concept of a standalone Web browser all together. During this time, Microsoft halted development of the standalone IE product, stranding Windows users with an out-of-date browser that required numerous security patches. Responding to the unexpected success of Firefox, Microsoft reconstituted the moribund IE team. In February 2005 the company announced that it would ship a new standalone IE version, IE 7, and include a version of IE 7 in Windows Vista. Since then, Microsoft has shipped the first beta version of IE 7, which includes a number of features Firefox and other browsers have had for some time, including tabbed browsing and RSS integration.

There are questions on both sides of the equation. For Microsoft, it's unclear whether IE 7 will be compelling enough to stem the slow trickle of users that vacate IE each month for Firefox. However, its bundling strategy has worked in the past, and some onlookers question whether Firefox will simply plateau at 10 or 15 percent of the market and never rise above niche status. That's the future the Mozilla Corporation is seeking to prevent.

Let's just hope Microsoft doesn't send a Terminator robot back in time to stop them.