Microsoft’s telecom spending spree struck gold last week. Not from the $5 billion (US$) it invested in AT&T — but from the $600 million it pumped into Nextel Communications.
Just when everybody thought the Reston, Virginia-based wireless phone company was about to merge with MCI WorldCom, Nextel broke off talks and instead allowed Microsoft to buy more than 16 million shares of its stock for $36 per share.
The influx of cash from the Redmond, Washington-based software giant will allow Nextel to expand its wireless network, and more aggressively market its product against stiff competitors such as AT&T and Sprint Corp.
Nevertheless, the big winner in this deal is Microsoft.
By wooing the publicly held Nextel, Bill Gates just came one step closer in making Microsoft the winner in the race to bring the first functional handheld e-commerce gadget to market.
Nextel has already carved out a 3-million-strong niche in the business market, with it’s digital phones that already offer such features as private paging and nationwide business networks. These networks allow businesses to connect by phone similar to an Internet newsgroup.
Under the deal, Microsoft plans to take Nextel to the next level by making it the first customer for MSN’s new “wireless portal” to be launched later in the year. The new service will deliver a potpourri of services including e-mail, news, sports and weather from — you guessed it — MSNBC. It will also offer calendar features from Microsoft’s recently bought Jump Networks. Plus, there’s also talk that stock quotes and travel directions could be part of the package for Nextel subscribers.
Some analysts say the deal is not only a masterful coup by Bill Gates and company, but it’s also another blow to America Online Inc.
In February, Nextel had announced a deal to use Web services offered by AOL’s Netscape Communications unit. However, after last week’s events the deal has been reported nixed.
Detractors of Microsoft are already screaming foul. They say it’s because of the company’s past monopolistic practices that it’s able to come up with the cash to make such sweet deals.
Others say it’s simply the free market system at its best.
What do you think? Let’s talk about it.