Check this out from Bloomberg. EGGS could be in play tomorrow
Microsoft Under Pressure to Acquire Internet Company
Redmond, Washington, Feb. 1 (Bloomberg) -- Microsoft Corp., the No. 1 software
maker, is under growing pressure to acquire an Internet company to strengthen its own
online businesses because of rapid consolidation in the new industry, analysts said.
Chairman Bill Gates told the Financial Times in an interview published today that his
company probably would make another Internet acquisition despite ''breathtaking''
valuations for Web- related companies. Microsoft reportedly talked to Excite Inc.
before it agreed to be acquired by At Home Corp., and to Lycos Inc., which is seeking
an investor.
Microsoft has the currency to make a big purchase using stock or cash. Its shares have
more than doubled in the past 12 months, raising its market value to $431 billion. It has
a cash hoard of $19.24 billion. President Steve Ballmer is revamping the MSN network
of Web sites to catch up with No. 1 online service America Online Inc. and top Internet
directory Yahoo! Inc.
''The pressure is on Microsoft,'' said Bill Whyman, an Internet stock strategist at Legg
Mason's Precursor Group. ''One thing that's changed is the acceleration of alliances.''
Yahoo said last week that it plans to buy personal Web-site provider GeoCities for
about $3.57 billion in stock, based on today's closing price. At Home, which provides
high-speed Internet access through cable TV networks, agreed to acquire No. 2
Internet search directory Excite for $7.82 billion in stock.
AOL has agreed to buy Netscape Communications Corp. for about $7.65 billion in
stock.
Ballmer in Charge
Meanwhile, Microsoft also is looking for a new head of MSN amid the revamp. Pete
Higgins resigned in November as group vice president of interactive media, which
includes MSN, to take a leave of absence.
Ballmer is running MSN in the interim and has moved his office to the satellite campus
where MSN is located, a couple miles from the company's headquarters in Redmond,
Washington.
Microsoft has yet to come up with a list of candidates to replace Higgins, analysts said.
''They're still in flux with strategy,'' said Joe Bartlett, an analyst at Yankee Group. ''You
hear they want to sell MSN access, then no, they want to spend a couple of hundred
million dollars to market it.''
MSN comprises an Internet access service and a network of Web sites ranging from its
Expedia online travel-bookings to its MSNBC news site, a joint venture with General
Electric Co.'s NBC.
Microsoft apparently has been rebuffed by at least one potential candidate.
Excite Chief Executive George Bell said Microsoft's executive search firm approached
him about the Higgins position. He said he wasn't interested because he felt he still had a
lot of work to accomplish at Excite.
Microsoft hasn't shied from acquisitions as a way of building up MSN.
It bought e-mail provider Hotmail Corp. for about $400 million in stock in late 1997
and LinkExchange, an online marketing network, for about $295 million in stock in
November.
Another acquisition would be aimed at capturing the loyal users of the target company.
''It's not that they're (Microsoft) not getting traffic,'' said Whyman. ''It's a matter of
keeping traffic.''
Microsoft held talks with Lycos, Whyman said. Among Lycos's attractions are its
WhoWhere site that lets users find people on the Web and its community chat rooms,
Whyman said.
Gates predicted at the World Economic Forum in Davos, Switzerland, that more
serious effort will be put into digital distribution of books and music over the Internet by
next year. Advances in software and screen technology will make so-called ebooks
more practical, Gates said.
Microsoft might be interested in buying a book or music retailer to take advantage of the
rapid growth in electronic commerce, analysts have speculated.
Borders Group Inc., the No. 2 U.S. bookseller, and egghead.com Inc., an online seller
of software, have been mentioned.
Microsoft shares fell 2 1/16 to 172 15/16 in trading of 20.3 million shares, the fourth
most-active U.S. stock. Earlier, they touched a record 175 15/16.
17:56:32 02/01/1999
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