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To: John F Beule who wrote (131)	5/7/1999 8:44:00 AM
From: John F Beule	Read Replies (1) \| Respond to of 589

From Bloomberg: Not one to stand still for too long, giant software maker has agreed to invest $5 billion in AT&T (T 61 1/2 +4 9/16) in order to secure a footing in cable-TV set top boxes which are expected to be the new medium of information delivery. While the field is wide open (or so they say) for others to also participate in this emerging market by making similar investments (the deal is non-exclusive, a lesson learned from its current scuffle with the government), Microsoft is not being shy about spending more than might be required to make sure that when the party begins, they are one of the beneficiaries of the trend to link consumer TVs with the Internet. For its money, Microsoft will receive 100 million preferred shares (at $50 a piece) and three-year warrants that will allow MSFT to buy 40 million shares in AT&T at $75 a piece. With the investment, AT&T will be able to defray a small portion of the cost associated with the purchase of MediaOne Group. AT&T will also install the Windows CE program in 2.5 to 5 million digital boxes. While $5 billion is a lot of money, MSFT has a treasure trove of cash waiting in the wings for exactly these opportunities and purposes. Hence, Microsoft does not expect the cash outlay to impact earnings. Yet, it is a clear signal of how serious Microsoft is about not being kept out of the new gin rummy game that is fast evolving for the client/server TV software medium that will make PCs less valuable as a franchise. Given how integral Microsoft is to the PC, it wants to make sure that it plays a significant role in whatever the new cutting edge home delivery medium is. While AT&T is just one player in this new field, it is becoming a giant in its own right. Microsoft recognizes that size matters and is lining up with as many players as possible to make sure they are not shut out.