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June 10, 1997updated 05 Sep 2016 12:39pm

MICROSOFT SINKS $1BN INTO CABLE TV COMPANY COMCAST

By CBR Staff Writer

Bent on furthering its vision of linking the worlds of personal computers and televisions, Microsoft Corp yesterday made a $1bn investment in Comcast Corp, the fourth largest cable television operator in the US. The investment represents a 11.5% stake in Philadelphia-based Comcast and gives Microsoft a presence on its board. The money will go towards the cost of deploying high-speed data and video services via its cable system, which is centered around the Northeast US. Comcast says that it spent $600m rebuilding its system last year, and the work is only 50% finished. Microsoft Chairman Bill Gates said he would be working closely with Comcast president Brian Roberts on a long-term strategy to converge televisions and personal computers into integrated home entertainment systems. Both companies say their vision of the future includes a variety of PC-TV devices, and the deal between them should lead to trials of such products over broadband networks in a little more than a year. Gates was attracted to Comcast, which is already working with @home Network Inc on a similar project, by its integrated approach to cable distribution, programming and telecommunications. Gates claimed that Microsoft’s plan has long included advanced broadband capabilities to deliver video, data and interactivity to the home. Earlier this year of course, the company acquired WebTV Networks Inc for $425m (CI No 3,135). Responding to speculation that this investment, coupled with the WebTV buy, means that Microsoft is evolving into a general media company, Gates insisted that Microsoft is not in the cable business and never will be. He doesn’t see his latest moves as expansions of Microsoft’s business and maintains that Redmond will concentrate on software and the eventual content flowing over the broadband pipe. The investment was made primarily to accelerate the building of that infrastructure, he says, which will be advantageous to the software industry in general. More specifically, it figures to accelerate the use of Windows CE, which will be the operating system for future WebTV products. Under the agreement, Microsoft will purchase 24.6 million Class A shares of common stock for $500m, and 21.2 million new issue Series B convertible preferred stock for $500m, the latter convertible after seven years in exchange for voting rights.

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