CAIS inks broadband deal with Microsoft

CAIS Internet Inc. (Nasdaq: CAIS) may get some attention Wednesday on news that Microsoft Corp. (Nasdaq: MSFT) will invest $40 million in the company as part of an alliance for broadband access.

Shares in CAIS, a broadband access provider for hotels, apartments and small to medium-sized businesses, closed at 16 3/4 Tuesday.

CAIS and Microsoft will develop a co-branded portal that will distribute Internet content via CAIS's broadband networks in the hospitality industry, focusing on business travelers. Microsoft may also participate with CAIS in multifamily dwelling unit industries, and apartment residents will be able to subscribe once CAIS broadband services go national.

Microsoft will provide CAIS with a co-branded version of the MSN portal as well as MSN Hotmail Web-based e-mail service, and other properties. Microsoft BackOffice will be an operating platform for CAIS and MSN services.

The investment part of the deal -- Microsoft's $40 million investment in CAIS Internet in convertible preferred stock at a conversion price of $24 per share -- is expected to close in the next six weeks.

CAIS is also slated to report a loss of $1.07 a share for its first quarter on May 8, according to First Call Corp.'s consensus.

The quarterly report may also show strong revenue growth and continued penetration into the hotel market, according to a report from Chase H&Q on the company.

"CAIS trades at a discount to its peer group," analyst David Levy stated in the Chase H&Q report, which also said the company should strengthen on the basis of a recent partnership with 3Com (Nasdaq: COMS), as well as equity investments from Kohlberg Kravis Roberts (KKR) and Qwest (NYSE: Q).

CAIS' competitors include WorldGate Communications (Nasdaq: WGAT) and uniView Technologies (Nasdaq: UVEW).