Microsoft-MCI Venture Part of Internet Plan

Microsoft Corp.’s announcement Monday that it will form a strategic alliance with MCI Communications Corp., the nation’s second-largest long-distance phone company, is one of a series of moves by the software giant to boost its lagging position in the booming Internet business.

The deal also marks a sharp strategy shift for MCI, which had been developing its own Internet service in conjunction with partner News Corp.

Under the agreement with MCI, Microsoft will help market MCI services in exchange for an MCI commitment to use Microsoft’s Internet software.

Earlier this month, CompuServe, a major online service provider, agreed to use Microsoft’s Internet Explorer, an application for browsing the Internet, as a core part of the software used by its 4 million customers.

Microsoft is also renewing its push to improve the content it offers on the Internet. The Redmond, Wash.-based company is working with Wal-Mart Inc., the world’s largest retailer, on a service that would allow Wal-Mart to use the Internet to sell its goods.

Last month, Microsoft announced a joint venture with television broadcaster NBC to offer news over the internet.

MCI, for its part, will scale back its previous efforts to launch an Internet service in cooperation with News Corp., in which it made a $2-billion equity investment. MCI Chairman Bert Roberts was vague about plans for News Corp.’s Delphi Internet service, which had been the focus of MCI’s ambitious Internet strategy.

When it comes to the Internet, Microsoft needs all the help it can get. The company announced a major initiative last month to boost its presence on the Internet. However, Microsoft’s share of the market, including browsers for surfing the Internet, remains minuscule compared with market leader Netscape.

As long as Netscape dominates the market for browsers, analysts say, it is also in a strong position to sell software for developing and offering Internet services.

Under its deal with MCI, Microsoft will put an MCI icon on its Windows 95 software that will give customers easy access to MCI telecommunications services, including conference calls. Microsoft will also use MCI for key communications services.

In exchange, MCI will offer a new, customized version of Microsoft’s online service, Microsoft Network (MSN). Roberts said the new service will give “affordable and high-quality access to the Internet via the MCI network.”

“It’s very exciting to have MCI helping us to market MSN through their direct channel to over 20 million customers,” Microsoft Chairman Bill Gates said in a telephone news conference. “It’s very important for us to get the share of our browser up.”

As part of the deal, MCI will offer Microsoft’s browser, Internet Explorer, as its preferred software.

“It’s a pretty big win to have MCI pushing your browser,” said Rick Spence, analyst at market research firm Dataquest.

Microsoft is also working with Wal-Mart to develop an Internet commerce site that would sell everything from snow tires to clothes to toothpaste.

“Microsoft was burned being just a little late on the Internet, so they are now trying to plant their flag on all other areas,” said Jesse Berst, editor of Windows Watcher.

Wal-Mart and Microsoft declined to provide details about the deal.

With 600,000 customers, Microsoft Network is the fourth-largest online service provider.