MS may invest $1 billion in US West
Microsoft is close to an agreement to invest up to $1 billion in the cable television operations of US West, according to reports.
The investment would buy Microsoft as much as 6.3
percent
of US West's cable business at the current stock price, The New York Times reported today in its electronic edition.
The Times said that talks between Microsoft and US West were
moving quickly, and that Microsoft hoped to announce a deal before the Western Cable Convention, an industry trade show in early December.
The news comes three weeks after another report that said Microsoft was ready to invest $1 billion in Tele-Communications (TCI) (TCOMA), one of the nation's largest cable operators.
That deal has been put on hold, according to the paper, due to Microsoft's concern over TCI's 39.5 percent stake in potential Internet access competitor @Home Networks.
Microsoft executives could not be reached for comment on today's report. Reached at home last night, Tom Cullen, president of US West's U.S. media group, would not comment on the report.
The investments are part of Microsoft's strategy to expand beyond the PC
market into digital and interactive television. Although Microsoft has a
virtual lock on the PC market, the penetration of PCs into the home seems
to have stagnated at 40 percent. On the other hand, most American homes
have TVs, and Microsoft hopes to mine that market through interactive cable
access.
"It is clear and well-understood that Microsoft and other Silicon Valley companies recognize the potential of broadband networks," said a person familiar with the negotiations.
Through its $1 billion investment last June in cable operator Comcast and its $425 million purchase of WebTV, Microsoft is throwing its considerable weight behind the idea that a significant market lies in interactive cable television. Bill Gates hopes to be there to design how the consumer uses TV to access the Internet and what that user will see.
The issue for Microsoft is control of new set-top boxes that will permit this high-speed interactive service. If Microsoft's wishes were to come true, the operating software might be Windows CE, and its Microsoft Network would be the online interface.
"Microsoft wants to make sure that they do whatever it takes to get Microsoft software into the home," said David Card, an IDC/Link analyst. "Whether it is through PCs or set-top boxes, they want to continue to mine the people out there."
Card added that Microsoft is in a platform war to grow its business and make sure that no other platform emerges.
Cable companies however, not used to being dictated to, are discussing the new standards through CableLabs, a nonprofit research group headed by a consortium of large cable operators, comprising Comcast, Cox Communications , Tele-Communications, and Time Warner Cable.
Reuters contributed to this story.