Microsoft to Buy Small Stake in Nextel for $600 Million
Just days after talks to be acquired by MCI WorldCom Inc. failed, Nextel Communications Inc. said Monday that it will sell a small piece of itself to Microsoft Corp. for $600 million in a deal to provide Internet services for wireless phones.
The companies plan to create a Nextel version of the MSN Web portal to supply e-mail, calendar and address book functions for an Internet-ready phone to be introduced by Motorola Inc. later this year.
The deal announced Monday will give Microsoft a 4.25% stake in Reston, Va.-based Nextel and provide Nextel with funds that will help it continue building and improving its wireless network. “To do that requires huge amounts of capital,” said F. Drake Johnstone, an analyst with Davenport & Co. in Richmond, Va.
The Microsoft deal represents a per-share value of $36 for Nextel, slightly shy of Friday’s closing price of $36.38. That is well below the nearly $45-a-share price that Nextel reportedly sought in the proposed acquisition by MCI WorldCom.
The Nextel-branded version of the MSN portal will also provide Nextel wireless customers with timed or prompted notifications of stock quotes, sports scores and other news and information.
Redmond, Wash.-based Microsoft, which dominates the market for computer operating systems and many other types of software, has been trying to ensure it plays a role in key growth areas in relation to Internet access, such as wireless phones and cable TV lines.
Within five years, analysts say, Internet-ready phones will be huge players in telecommunications and computer access because they will be light in weight, convenient and allow users to get information from almost anywhere.
Last week, Microsoft made a deal to invest as much as $5 billion in AT&T; Corp., which plans to use cable TV wires for Internet access, telephone calls and entertainment.
“It’s very important for them to be well-positioned with those two markets,” Johnstone said.
In Nasdaq trading, Nextel rose 56 cents to close at $36.94 and Microsoft rose 63 cents to close at $79.69.
