Gates grabs a new gateway

The $425 million that Microsoft Corp. paid for WebTV Networks last week may be an enormous sum for the Palo Alto, Calif.-based Internet TV company, but it's only a drop in the bucket to the computer giant looking for an alternative route into American homes.

WebTV will operate as a subsidiary of Microsoft's consumer platforms division, said Craig Mundie, senior vice president of Microsoft, who announced the deal during his keynote address at the National Association of Broadcasters conference in Las Vegas.

"This underscores Microsoft's commitment to more aggressively blend the best of the Web and personal computers to create better TVs, better PCs and other intelligent appliances," Mundie said.

The two companies will create "the next version of TV, the technology that will mean as much to the average person in terms of his daily life, the way he will get information or be entertained, as TV has meant for the last 50 years," said Steve Perlman, founder, president and chief executive officer of WebTV.

Since Microsoft bought a minority stake in WebTV last fall, the two companies realized that "the synchronization between our visions is incredibly close," and Microsoft "popped the question" in January, he said.

WebTV will incorporate Microsoft's Windows CE operating system and Internet Explorer into its set-top terminals, which Sony Electronics and Philips Consumer Electronics make for about $300 retail.

The acquisition-Microsoft's largest Internet-related purchase-represents the software giant's desire to tap into an unreached part of the consumer market, said Robert Rosenberg, president of Insight Research Corp.

"[Microsoft] sees WebTV as a way to pull some pennies out of the computer-phobes," said Rosenberg. With television advertising revenues estimated at anywhere from $25 billion to $45 billion a year, WebTV is a way for Microsoft to tap into that fountain. "That kind of money makes it worth taking out a couple of shekels, as far as Mr. Gates is concerned," he said.

Bell Atlantic inked a deal late last week to use up to $1 billion worth of Lucent Technologies' 5ESS switching hardware and software over the next five years. The agreement includes converting a significant portion of Bell Atlantic's network from analog to digital.

SPRINT BOOSTS PCS PRESENCE Sprint PCS has added eight more cities to the roster of regions served by its personal communication services network, including Denver and Boulder, Colo., and Austin, Texas.

SWB EYES LONG-DISTANCE Southwestern Bell sought to enter the long-distance market in Oklahoma, becoming the second Bell regional holding company to do so. The RHC said it faces local competition and cited 16 interconnection agreements, including one with Sprint.