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Microsoft in Talks to Buy Stake in CWC, Person Says (Update3)
Bloomberg News
May 12, 1999, 7:31 a.m. PT
Microsoft in Talks to Buy Stake in CWC, Person Says (Update3)
(Updates Microsoft shares activity, adds details on
Microsoft's investments.)
London, May 12 (Bloomberg) -- Microsoft Corp. is in talks to
buy as much as 30 percent of Cable & Wireless Communications Plc,
a person familiar with the talks said, a move that would give the
world's largest software maker a stake in the third of the U.K.'s
three big cable companies.
Redmond, Washington-based Microsoft may invest as much as $4
billion in CWC, analysts said. CWC declined to comment. Microsoft
and Cable & Wireless Plc, which owns 53 percent of CWC, have held
discussion but declined to provide more details. The Wall Street
Journal reported the talks earlier today.
Microsoft, whose Windows software dominates the personal
computer market, is investing billions of dollars in companies
around the world to ensure its software will be used in
everything from cable set-top boxes to wireless phones. Some
analysts said the investment could pave the way for a merger of
the U.K's three biggest cable companies -- CWC, Telewest
Communications Plc, and NTL Inc.
''More consolidation in the cable industry is inevitable,''
said Simon Smith, who helps manage 10 billion pounds of U.K.
equities at Capel Cure Sharp. ''People are realizing that all
these media are joining together.''
For Cable & Wireless, the talks come as the company is
looking to dispose of some consumer businesses to focus on
providing high-speed services to businesses.
Shares in CWC, rose as much as 119.5 pence, or 19 percent,
to 747.5p. Microsoft rose 5/16 to 80 3/16 in midmorning trading.
Microsoft Spending Spree
Microsoft has about $22 billion in cash and is adding $2
billion to its coffers each quarter. In recent weeks, it has gone
on a spending spree in an effort to ensure it will have the same
dominant position in new cable-TV set-top boxes and wireless
phones that it now has in personal computers.
Last week, Microsoft agreed to invest $5 billion in AT&T
Corp. AT&T will become the largest U.S. cable-TV company after it
completes the acquisition of MediaOne Group Inc., and has vowed
to use Microsoft's software in as many as 10 million cable-TV set-
top boxes.
On Monday, Microsoft said it will invest $600 million in
nationwide wireless telephone company Nextel Communications Inc.,
giving it a toehold in the emerging market for wireless Internet
users.
In January, it agreed to invest $500 million in New York-
based NTL, the No. 3 U.K. cable-TV company. Last week, Microsoft
agreed to buy 29.9 percent of Telewest for an undisclosed price.
So far, the top three British cable companies have opted for
software developed by Network Computer Inc., whose largest
shareholders are Microsoft rivals Oracle Corp. and America Online
Inc. Microsoft hopes its investment can change that.
''Computers go beyond the desktops that we know today; they
will be in mobile phones and televisions,'' David Svendsen,
chairman of Microsoft UK, said in an interview. ''That's where we
want to be as well.''
Microsoft is always talking to Cable & Wireless, Svendsen
said., He declined to provide further details.
Cable-TV Talks
Two of the three U.K. cable companies are already in talks.
CWC said in April it was in talks with Telewest, the U.K.'s
largest cable company by residential customers.
Analysts say Microsoft may press them to combine to help
each compete better for phone customers again British
Telecommunications Plc, U.K.'s largest phone company, and for TV
customers against British Sky Broadcasting Group Plc.
Telewest, CWC and NTL each offer TV and phone service to
about a third of the country. British Telecom offers service
throughout the nation as does satellite television broadcaster
British Sky Broadcasting.
CWC, Telewest
A person familiar with the situation said in April that CWC
wants to sell this business to Telewest. Cable & Wireless would
be likely to hold on to the rest of CWC, which focuses on
business and corporate customers, Chief Executive Graham Wallace
said today.
''That obviously fits very well with our focus,'' he told
reporters on a conference call to discuss the company's fiscal
1999 results today.
Wallace declined to confirm the Journal's report that he
spoke with Microsoft Chief Financial Officer Greg Maffei Tuesday
about an investment.
''We talk to Microsoft a lot, but the only announced
discussions in regard to consolidation in the cable industry are
regarding Telewest and CWC,'' he said.
Microsoft also announced today that it agreed to buy Sendit
AB, one of Sweden's smaller software companies, for $120 million
in cash. Sendit's main product lets users browse the Internet and
send e-mails with a cellular phone.
The U.S. software company also joined forces today with Sony
Music Entertainment Inc., a unit of the world's No. 2 consumer
electronics company, to distribute music and videos over the
Internet. |
