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Concentric, Microsoft stretch pact and offerings

Concentric Network and Microsoft expand their existing relationship, including a slew of joint initiatives and a $50 million investment by Microsoft in Concentric.

Concentric Network and Microsoft today made room in their existing relationship as the two move forward to offer a slew of joint initiatives, including a $50 million investment by Microsoft in Concentric.

Internet services provider Concentric and software giant Microsoft said in a statement that they've decided to expand their relationship based on five initiatives focused on small and mid-sized businesses.

Under the deal, Microsoft's $50 million investment in the ISP is in the form of 7 percent convertible redeemable preferred stock due June 2010, the companies said. In return, Concentric said it will issue Microsoft a warrant to purchase 500,000 shares of its common stock at its current market price. Concentric also said it will spend $7.5 million to advertise and promote its services via the MSN network of Internet services.

On top of the investments, San Jose, California-based Concentric said it will establish a cobranded version of the MSN portal for its dial-up and broadband DSL Internet subscribers and develop and comarket the Microsoft Windows NT server-based application hosting services.

In the cobranded portal offering, Concentric said it will offer the MSN Hotmail Web-based email service as its preferred email service for its subscribers. Microsoft and Concentric also will work together to offer a cobranded MSN portal focused on DSL for Concentric's small and medium-sized business customers, the companies said.

Later this year, Concentric said it will launch several new hosting services based on Microsoft's Windows server and the Microsoft BackOffice line of server products. Microsoft said it will help in the development of application hosting services based on Microsoft technology, which could include Microsoft Exchange email services, Microsoft Windows media services, and other purchasing, financial, and customer relations applications based on BackOffice.

In January, Microsoft partnered with Concentric and nine other ISPs to offer e-commerce site hosting. As reported, Microsoft formed the partnerships to help mid-sized to large businesses with their e-commerce site building using Microsoft Complete Commerce, a bundle of software, hardware, and services.

On top of the applications hosting pact, both companies have agreed on a two-year extension of Concentric's current contract to supply network services to Microsoft's WebTV service.

Concentric and WebTV Networks have entered into a two-year extension and expansion of the current contract for IP network services that began in early January. The contract, extended until December 2002, is estimated to be between $150 million and $200 million, Concentric said.

Currently, Concentric provides dial-up access to the interactive television and Internet services for subscribers to the Microsoft WebTV Network Classic and WebTV Network Plus services throughout the United States and Canada.

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