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Follow UsScott Hillis
SEATTLE: Microsoft Corp. stands to win big from the $47 billion sale of
AT&T Corp.'s cable network to Comcast Corp., with the software giant finally
seen making inroads in high-speed cable Internet access and interactive
television, analysts said on Thursday.
The deal calls for Microsoft to convert its five billion dollars investment
in AT&T debt into 115 million common shares of AT&T Comcast, giving it a
vote in what will be the country's biggest cable network with 22 million
subscribers.
There is no new investment from Microsoft, and the company declined to
comment on whether there were any firm agreements for the new company to use
Microsoft products or services.
But a spokeswoman outlined a broad vision of the deal's implications for
Microsoft and said executives from its interactive TV unit and its MSN Internet
operations had talked to AT&T and Comcast as the deal was put together.
"Microsoft will have the opportunity to bring high quality software,
services and interactive TV to consumers. Microsoft's partnership with the new
company will help deploy high-speed Internet access and broadband
services," a spokeswoman said.
Analysts agreed the relationship is more promising for Microsoft than the
previous one, which never lived up to expectations that it would give Microsoft
a leg up in offering a new generation of Web-based services.
Microsoft next year plans to roll out a subscription product called .NET
MyServices that will include things like an online calendar, event notification
and easy shopping. It is also banking heavily on online music and video that
require fast connections.
But Microsoft co-founder and Chairman Bill Gates has lamented frequently and
loudly that the slow adoption of broadband is hampering such a strategy.
"From what I can tell, Microsoft is now going to get a little bit more
influence in the combined company," said Matt Rosoff, an analyst with
Directions on Microsoft, a Kirkland, Washington-based research firm that focuses
on the company.
"It's pretty key to a lot of their initiatives, particularly consumer
services," Rosoff said. All those things require high bandwidth, always-on
connections." Shares in Microsoft fell $2.23, or 3.2 per cent, to $67.28 by
late afternoon on Thursday. While the stock is off its year high of $76, it has
risen 67 percent off its year low and has proved a "safe-harbor" stock
amid recent market turmoil.
Satisfyingly to Microsoft, Comcast's winning bid is a body blow to Microsoft
arch-rival AOL Time Warner Inc., which had sought more outlets for its America
Online Internet access service and deep vaults of content. "At the very
least it should provide a block to AOL Time Warner," said Rob Enderle, an
analyst with technology consultancy Giga Information Group.
Cable is a key battleground for a high-stakes war to see who will dominate
the dawning age of Web services and on-demand entertainment. While only nine per
cent of US homes had fast Internet connections last year, that is expected to
rise to 41 per cent by 2006, with cable seen as the main on-ramp, according to
market research firm Jupiter Media Metrix.
Interactive television is another area of keen interest by Microsoft. Beefing
up cable set-top boxes with fancy software can turn the TV into a center for a
suite of entertainment services such as video-on-demand, digital music and
instant messaging.
Microsoft has struggled to get its TV software deployed, and suffered a blow
earlier this year when AT&T scaled back plans to rollout advanced
interactive services with Microsoft products, instead opting for a more modest
plan.
While Rosoff felt Microsoft could be backing away somewhat from interactive
TV, Enderle said the market was a big one because it demanded a deeper
commitment than the high-speed Internet access business. "I-TV is more
important. It's a proprietary top-to-bottom deployment. The set-top box is a
closed environment and if they get that, they keep it," Enderle said.
(C) Reuters Limited.