Microsoft May Ally With Loral for Satellites

Microsoft Corp. said Chairman Bill Gates and President Steve Ballmer will unveil a “strategic partnership” Thursday that analysts said may involve an investment in Loral Space & Communications Ltd.

Several analysts, including Keith Patriquin at Loomis, Sayles & Co., said they’d heard that Microsoft might buy Lockheed Martin Corp.’s stake in Loral, the No. 2 U.S. satellite-communications company. Microsoft declined to comment on that possibility or the business involved.

Microsoft, the world’s biggest software maker, has been investing heavily to promote high-speed Internet access through cable and telephone networks as a way to build the market for Web software and services. A satellite network would fill a gap in its strategy, with Loral’s Cyberstar division providing broadband services to desktop computers, analysts said.

“There’s a lot of price-conscious buyers who are looking at this beaten-down sector, especially given the implication it has for the future growth of the Internet, data communications, etc.,” said Patriquin of Loomis Sayles, which owned 145,119 Loral shares as of September.

Microsoft invested $5 billion in AT&T; Corp., soon to be the biggest U.S. cable-TV operator, and $200 million in Qwest Communications International Inc., which has a fiber-optic network and plans to merge with US West Inc.

“I wouldn’t be surprised to see them get into the satellite arena,” said Zia Daniell Wigder of Jupiter Communications. “Cyberstar might be a shorter-term play than Skybridge,” she said, referring to a rival satellite network.

Cyberstar is aiming to start operations by 2001, while Skybridge is aiming for 2002 or 2003, she said.

Lockheed has made no secret of its desire to sell its stake in Loral.

Gates personally has invested in satellite broadband technology through his participation in Teledesic, a company building an “Internet in the sky.” That investment isn’t through Redmond, Wash.-based Microsoft.

Microsoft shares fell $1.75 to $87.13 on Nasdaq. Loral rose 69 cents to $16.50 on the NYSE.