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Microsoft invests in Tut Systems

The software giant expands its efforts to bolster the high-speed data market by investing in the developer of high-speed data connections.

Microsoft has expanded its efforts to bolster the high-speed data market by making an investment in Tut Systems, a developer of high-speed data connectivity.

Tut said today that it received $15 million in investments from Microsoft, AT&T Ventures, and Itochu International to speed the company's technology, dubbed "HomeRun," to market.

Tut already has signed a cooperative marketing agreement with lead investor Microsoft that is centered around HomeRun, which is aimed at the home networking and high-speed Internet access markets.

Looking to expand its cable presence for high-speed Internet access, Microsoft last month made a last-minute offer to acquire a 20 percent stake--worth about $400 million--in access provider Road Runner, according to sources, who noted that Microsoft's negotiations are ongoing and have not yet concluded.

Microsoft's latest investment illustrates the software giant's growing interest in another type of fast Internet access, one that uses existing copper telephone wires and telephone service.

HomeRun enables multiple PCs to share peripherals, connect to one another, and/or to the Internet on a 1-mbps Ethernet-compatible LAN. It also will be able to instantly distribute Universal ADSL service or other high-speed services to every phone jack within a home, Tut Systems said.

AT&T's investment allows it to join the ranks of several other telecommunications companies offering high-speed Net access using ADSL, which maximizes the potential of regular copper phone lines. BellSouth and PacBell, for example, recently announced that they will be offering high-speed access using ADSL.

"Tut is a key player in the race to leverage the existing multibillion-dollar copper wiring infrastructure," Neal Douglas, general partner of AT&T Ventures and a member of Tut's board of directors, said in a statement. "Its extensive portfolio of FastCopper products gives it a unique advantage in that competition."

More than just helping people connect to the Internet at faster speeds, Microsoft and Tut are working together to stimulate development of HomeRun-based consumer hardware products as part of Microsoft's efforts to create new standards for the home networking market.

"We believe Tut's technology hits the sweet spot in combining high data rates, ease of use, low cost, and low barrier to adoption in the consumer market on phone wire media," Steve Madigan, a senior director in the Windows Operating System division at Microsoft, said in a statement. "This investment encourages continued development by Tut of key technology that we believe will have significant impact on the consumer networking market."

These latest strategic investments also will help Tut drive its HomeRun technology into the company's established markets, including high-speed xDSL Internet access.

"By integrating HomeRun into our second-generation Expresso GS xDSL system and placing that system in the wiring closet for an apartment building, for example, we can instantly 'high-speed enable' every phone jack in the complex," said Sal D'Auria, president and CEO of Tut Systems. "This is just one of the huge and largely untapped markets for new services opened up by HomeRun."