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Microsoft cuts deal to build intranets

Microsoft teams up with British Telecom and MCI to offer intranet hosting and systems integration services beginning early next year.

Microsoft (MSFT) plans to couple its software with the telecommunications technology of British Telecom and MCI (MCIC) in a major intranet hosting and systems integration offering that will be widely available in the first quarter of next year, the companies said today.

The announcement comes one day after the two telephone carriers said they had completed a $60 million Internet upgrade to their Internet backbone. MCI said the upgrade would quadruple its Internet backbone speed.

Both developments show that BT and MCI, which are proposing to merge, want to become a global giant in advanced communications, not just in local and long-distance phone calling.

The Microsoft-BT-MCI venture is designed to provide one-stop shopping for the software, hardware, and communications services involved in deploying corporate intranets. The offering is currently in beta testing.

Also starting in the first quarter of 1997, the three companies will add a new service to build and manage network-based intranets for corporate clients. That fast-growing business is more profitable than Microsoft's much-ballyhooed browser wars with Netscape.

Microsoft brings to the deal an array of software, including its Windows NT operating system, BackOffice applications suite, and Internet software such as the Internet Explorer Web browser and Commercial Internet System, formerly known as Normandy.

BT and MCI, through their Concert joint venture, will bring managed data networking services to hundreds of cities in 50 countries, as well as access to its recently completed Internet backbone infrastructure linking the United States and Europe.

MCI also has Internet deals with Microsoft involving its Internet Explorer browser and Microsoft Network.

The companies see phenomenal market potential. They estimated that the total Internet market will grow to $43 billion by 1999, with more than half of that sum coming from corporate investments in intranets.

Two weeks ago, MCI and British Telecom announced plans to merge in a deal worth more than $20 billion. The deal is likely to face close regulatory scrutiny.