Microsoft completes Nextel investment

Microsoft Corp. (Nasdaq: MSFT) agreed on Friday to buy at 4.25 percent stake, or 16.67 million shares, in Nextel Communications Inc. (Nasdaq: NXTL) for $36 a share. The deal had been previously announced earlier this month.

The transaction will give Microsoft's MSN Web sites a prominent spot on Nextel's online wireless service. Nextel will use the deploy Nextel Online, develop other digital services, expand the Nextel's U.S. network as well as its networks in other countries.

The Nextel purchase helps out the MSN service, which is battling with Yahoo! Inc. (Nasdaq: YHOO) and America Online Inc. (NYSE: AOL). The real benefit to the software company, however, is getting into the wireless market. Windows CE is getting boxed out of the digital set-top box market and 3Com Corp.'s (Nasdaq: COMS) Palm Pilot has retained its popularity in the hand-held market.

Yet, with mobile phone makers, such as Nokia Oyj (NYSE: NOK.A), now making handsets with Internet access, Microsoft may have a new venue to incorporate its Web business as well as its operating system.

In the past several months, rumors that MCI WorldCom Inc. (Nasdaq: WCOM) was looking at Nextel kept springing back to life, despite WorldCom's repeated denials of interest.

On May 17, Microsoft announced its intent to make a $600 million cash investment in Nextel.

Shares of Nextel dipped 11/32 to 34 5/8 on Thursday. Microsoft lost 1/8 to 78 3/8.