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Details of Microsoft-Banyan pact emerge

The software giant will buy a piece of Banyan by investing in its common stock, and the companies will jointly develop connectivity and migration tools.

Microsoft revealed details of its plan to buy a piece of Banyan Systems, announcing it will invest in the company's common stock commit $10 million to train its employees.

Network software provider Banyan, which has been searching for new ways to expand its growing network services unit, said today that the company will jointly develop connectivity and migration tools with Microsoft. The two companies aim to make their products interoperate.

For Banyan, the deal helps solidify the company's prospects, which lie in its StreetTalk directory and tools that ease migration to Microsoft's popular Windows NT operating system. For Microsoft, the alliance helps the company push Windows NT--which competes with Banyan's network operating system Vines--further into corporate networks.

William Ferry, Banyan's chairman, said Microsoft's endorsement helps ensure customers and investors that the company, despite a rocky financial road, has a bright future with the backing of an industry leader. Also, the partnership will help satisfy Banyan customer demand for compatability among Banyan and Microsoft products, he said.

"We heard loud and clear that NT was becoming the platform of choice [in companies] and that Exchange was becoming platform of choice for email and messaging," Ferry said.

The deal focuses on interoperability between Banyan BeyondMail and Microsoft Exchange, and on enterprise directory services, including interoperability between Banyan Vines and StreetTalk and the Windows NT Server and Windows 2000 Server.

The company has no immediate plans to discontinue any Banyan products, Ferry said.

The agreement excludes any technology transfer between the two companies, said Ian Rogoff, Microsoft's general manager of enterprise partnerships. Ferry added that the deal is not a Banyan endorsement of Microsoft products, but rather a commitment to interoperability. Under terms of the alliance, Microsoft will give Banyan $10 million over three years to train at least 500 employees in marketing and product development on the Microsoft platform.

Additionally, Microsoft will buy 1.75 million of the company's common stock warrants, which are subject to a three-year lock-up provision that depends on continuation of the alliance. If exercised, Microsoft will own 7.5 percent of Banyan.

Westboro, Massachusetts-based Banyan has enjoyed a resurgence since last year, pulling its share price back into the double digits. The company posted third quarter earnings of $681,000, or 3 cents per share.