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Microsoft bids on Road Runner

The software giant makes a last-minute offer to acquire a 20 percent stake in high-speed Internet access provider Road Runner.

Looking to expand its cable presence, Microsoft has made a last-minute offer to acquire a 20 percent stake in high-speed Internet access provider Road Runner, according to sources.

Microsoft's $400 million offer has pushed a competing investment bid from Oracle, as well as one from Intel, off the table, at least for now, sources said.

Sources cautioned, however, that Microsoft's negotiations are ongoing and have not yet concluded.

"There have been discussions with Microsoft going back a year, but nothing came to fruition. There [also] have been discussions with other investors," one source said. "Now, it's at a point where everyone understands that a deal has to be made, and that has gotten everyone to step forward if they're interested."

Road Runner needs to complete the investment deal as part of its plans to create a national broadband network that provides high-speed Net access via cable.

Time Warner's Road Runner announced in December that it would team up with US West's MediaOne Express, creating a giant that would rival @Home in size. The deal has yet to close, however.

"The [deal] is a little bit behind target," said the source. "The potential investment is the last piece that's needed to close the deal. All the parties involved want this deal done and are working diligently to accomplish that."

Another source said it is still unclear whether Oracle will come back to the table with a higher offer. Either way, Road Runner expects to make a decision on the matter later this month or next, the source said.

As previously reported Oracle was interested in taking a minority stake in the Road Runner-Media One venture. Network Computer Incorporated, controlled by Oracle, would provide the software for the service's set-top boxes.

Microsoft's offer, first reported in the Wall Street Journal today, may not necessarily shut out NCI in the set-top box deal, an industry analyst said.

"These investments do not necessarily lead to a technology adoption," said Michael Harris, president of cable industry research firm Kinetic Strategies. "Microsoft invested $1 billion in Comcast, and a year later it hasn't done anything strategic with Microsoft."

Harris pointed out that in staking out acquisitions like Road Runner, Microsoft--like other high-tech companies--primarily is interested in bringing high-speed access into the home in order to grow its market and further spur sales of its core products.

Officials from Road Runner, NCI, and Intel declined comment.

(Intel is an investor in CNET: The Computer Network.)