The announcement sent shares of Intervu rocketing 37.5 percent higher this morning. The stock rose 33 points to 121 before slipping slightly to 120, surpassing in intraday trading its 52-week high of 97.5.
Intervu said it plans to use the investment to expand its broadband capabilities and to develop affordable applications based on Microsoft's Windows Media software in an effort to lure a greater number of users to streaming media.
"Microsoft gains an ally in the war with RealNetworks," Phil Leigh, an analyst at Raymond James, wrote about his initial conclusions on the investment. "Intervu gets further validation, following the $20 million CNN investment at about $60 per share last month, that their technology is genuine and respected by authoritative industry constituents."
The investment allows Microsoft, which has been embroiled in a long battle against rival RealNetworks in the streaming media market, to bring its Media Player to a larger number of media content companies. Recently, RealNetworks said it would focus its efforts on being both a streaming media infrastructure company and a content aggregator. Microsoft, on the other hand, is positioning its streaming efforts to be an infrastructure player only.
Intervu, which competes against better-known streaming media firms RealNetworks and Yahoo's Broadcast.com, helps content partners bring streaming media to the Web. The company has deals with Bertlesmann, NBC and, as of last month, CNN. Intervu also has a deal with CNET to provide all of its streaming services. CNET is the publisher of News.com.
"Our strategic alliance with Microsoft is a strong endorsement of Intervu's strategy to build the most advanced broadband network dedicated to multimedia content," Harry Gruber, chief executive of Intervu, said in a statement.
Microsoft will purchase shares of a new series of Intervu senior convertible preferred stock for $30 million, which may be converted into common stock at a conversion rate of $90 per share. This represents a 27 percent premium over Intervu's 20-day average closing price.
The terms of the security specify an annual dividend rate of 6.5 percent payable quarterly in stock or cash. Microsoft will receive a five-year warrant to purchase 60,000 shares of Intervu common stock with an exercise price of $90 per share.