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Microsoft joins with Telmex in portal venture

The Spanish-language site will mark yet another effort to reinvigorate the company's struggling MSN brand and establish a credible international Web presence.

Microsoft announced a joint portal venture with telecommunications giant Telefonos de Mexico, marking yet another effort to reinvigorate the company's struggling MSN brand and establish a credible international Web presence.

The deal comes more than a year after the software company announced a sweeping effort to establish Web portals in 24 countries, including Mexico and several South American nations. A spokesman said MSN is up and running in 29 countries, including the United States, but would not disclose details concerning customers or usage.

"In some countries we have a portal, in some other countries we have a partnership with a local provider who can help us get reach and help us get content," said Microsoft's Steve Guggenheimer, adding that the plan hasn't changed much since last October.

Whether that plan is panning out isn't clear.

Microsoft has spent millions of dollars to beef up its MSN service, which has stagnated at about 2 million users, according to research firm Jupiter Communications. Meanwhile, rival America Online has raced ahead, boasting more than 20 million users of its AOL and CompuServe services. Those numbers include 1 million users in Germany, a country that Microsoft abandoned last year.

Although Microsoft says it is banking on its portal strategy to put earlier missteps behind it, the company continues to go in several directions at once.

After pulling the plug on its 30,000-subscriber German online service, for example, Microsoft in August told the newspaper Welt am Sonntag that it would relaunch its MSN Internet service in Europe. "We will start MSN anew in most European countries," the company's head for Europe, Bernard Vergnes, was quoted as saying, adding that the relaunch was expected within 18 months.

In March, Microsoft and Hong Kong Telecom announced plans to develop a high-speed broadband service, providing shopping, movies, news, music, and software via home personal computers and television sets.

Microsoft is moving forward with several other international portal ventures. For example, Microsoft and Israeli Internet service provider Internet Gold recently announced plans to launch a Hebrew-language portal on December 1. The portal, a gateway to the Internet, will be a Hebrew version of Microsoft's MSN portal.

Sealing the deal
Under the Telmex deal announced today, Microsoft will offer Spanish-language content through its MSN Web service. In addition, it will offer Spanish-speaking subscribers bundled software services such as free email, instant messaging, and Web publishing.

Telmex--which, according to a company statement, manages 10.2 million phone lines and serves 3.2 million wireless users--will provide the local infrastructure to host the sites and handle sales.

"What's most relevant about this alliance is the enormous potential of local content and options Microsoft and Telmex will offer to Spanish-speaking Internet users," Mauricio Santillan, regional vice president of Microsoft Latin America, said in a statement.

The move also allows Microsoft to extend the reach of its bundled software services, something the company has said is central to its recently revamped Internet strategy.

In making the move to Latin American markets, Microsoft faces stiff competition.

Yahoo Spanish was launched in June last year, and America Online this summer unveiled AOL Brazil with its Venezuelan partner, Cisneros Group.

In Latin America, all three compete with upstart StarMedia, which launched its first Spanish Web site in December 1996 and has made significant inroads among Spanish and Portugeuse speakers, with 425,000 registered email users as of March 31, 1999, according to SEC filings.

Reuters and Bloomberg contributed to this report.