> Microsoft, AT&T held Internet talks
> By Kevin Maney, USA TODAY, 1/8/99
> AT&T and Microsoft have discussed AT&T buying the Microsoft Network and
> perhaps other Microsoft media properties, say people close to both
> The talks were generated from the top, including a dinner at Microsoft
> CEO Bill Gates' house attended by AT&T Chief Executive C. Michael
> Armstrong and President John Zeglis in the fall. But AT&T appears to
> have decided not to buy the properties for now, while Microsoft
> considers the talks to be ongoing, according to people who know about
> each company's position.
> Representatives from both AT&T and Microsoft said they would not
> The talks apparently included AT&T absorbing the Microsoft Network
> Internet service provider (ISP) into AT&T WorldNet. AT&T could also take
> stakes in or ownership of Microsoft media Web sites, such as the MSN
> portal and Web-based Slate magazine. In exchange, Microsoft would not
> only want money from AT&T but also a deal to have AT&T adopt and promote
> Microsoft Windows NT software.
> In some ways, such a deal would make sense for AT&T. Getting the MSN
> ISP, which has about 2 million subscribers, would double the size of
> WorldNet. It would make AT&T the clear No. 2 in Internet access, behind
> America Online, which has more than 13 million subscribers, says Kate
> Delhagen, analyst at Forrester Research. "Consolidation is the name of
> the game" in ISPs, she says, and AT&T needs an MSN-like deal to stay
> ahead of others who are consolidating.
> As for the Internet media properties, on one hand AT&T has never been a
> media company. But it's buying cable TV giant Tele-Communications Inc.,
> which has major media holdings. Owning access plus pieces of content to
> pump through that access has been TCI's business model in cable for the
> past decade. So AT&T-TCI might not hesitate to own Internet media sites.
> Still, AT&T has for now decided it's not comfortable cutting any deal
> with Microsoft. In part, it may not want to be an owner of Microsoft's
> money-losing Web sites, analysts say.
> It's not surprising that Microsoft would pitch such a deal to AT&T,
> observers say. Microsoft's media properties have not only been in red
> ink, they've also been an uneasy fit with the rest of the company. And
> the MSN ISP "has never been successful," Delhagen says. "It's not
> Microsoft's core business."
> Says Charles Brewer, CEO of MindSpring, an MSN competitor: "There's
> probably been a lot of internal debate about selling it." He adds: "If
> we do a future acquisition, it would be high on our list."
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