Microsoft May Spin Off Internet Business to Ease Acquisitions
Redmond, Washington, May 4 (Bloomberg) -- Microsoft Corp., the world's biggest software maker, may consider spinning off its online business into a separate company to strengthen its hand in the purchase of other Internet companies, analysts said.
Microsoft is unlikely to create a so-called tracking stock now to bolster its position in the battle for cable television company MediaOne Group Inc., said Andrew Roskill, an analyst with Warburg Dillon Read, who has a ''buy'' rating on the stock. Microsoft is mulling the creation of a tracking stock to reflect the results of its Internet properties as well as any new cable operations it may acquire, the Wall Street Journal reported earlier.
The software powerhouse has spent more than $1 billion in building up its Internet activities, which include the MSN network of Web sites and Hotmail e-mail, analysts said. Spinning those off into a separate company could increase Microsoft's buying power, because Internet companies carry high valuations. ''It would allow them to do large-scale acquisitions,'' said Roskill. ''But it's hard for me to believe they're going to pull together this change in business structure'' in the next couple of days, he said.
Microsoft has until Thursday to decide whether to help Comcast Corp. trump a $62.5 billion offer for MediaOne from AT&T Corp. MediaOne accepted the AT&T offer on Sunday, saying it would give Comcast until Thursday to come up with a competing bid, following its $52.53 billion offer made in March.
Microsoft and Comcast
Redmond, Washington-based Microsoft owns more than 5 percent of Comcast and has signed a confidentiality agreement with the No. 3 U.S. cable operator to review its bid for MediaOne. Cable modems offer high-speed connection to the Internet, where Microsoft is pushing software and services.
Microsoft owns 10 percent of MediaOne's high-speed Internet access service known as Road Runner.
A spinoff of its Internet business probably is something that Microsoft has considered for some time, analysts said. ''Microsoft seems to think maybe that it's not seeing the full value in its current stock price, in the common shares, to reflect what it believes is the value of all its Internet and new media-type properties,'' said Thomas Hensel, an analyst at Everen Securities Inc., who has a ''short-term outperform'' rating on the stock.
Microsoft fell 1 13/16 to 78 1/16.
©1999 Bloomberg L.P.
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