Microsoft May Buy Stake in News Corp. Unit

Microsoft Corp. may pay more than $1 billion for a 3.5% stake in News Corp.’s Sky Global Networks, the world’s No. 1 satellite TV company, the Wall Street Journal reported, citing people familiar with the matter.

The world’s biggest software maker and Rupert Murdoch’s media group are in talks that “are progressing smoothly,” the paper said. Spokesmen Rick Miller at Microsoft and Andrew Butcher at News Corp. wouldn’t comment.

An investment by Microsoft may make Sky Global more attractive to investors as it prepares for an initial share sale this quarter. Microsoft has invested billions of dollars already in cable-TV companies to help make its software as common in interactive-TV products as in personal computers. Its Windows operating system runs almost 90% of the world’s PCs.

“It’d be good for the prospects of the company that someone like Microsoft was prepared to put in fairly chunky money,” said Bruce Smith, who helps manage $1 billion at Zurich Financial Services Group. Yet, such a purchase would value Sky Global at $30 billion, not the $40 billion that Murdoch said in late September was appropriate, Smith added.

American depositary shares in News Corp., each representing four common shares, rose $1 to close at $42.19 on the New York Stock Exchange. They’ve fallen about 24% over the past month as investor enthusiasm for media companies has waned on concern that a slower economy will hurt ad sales.

Murdoch said this month that News Corp.’s U.S. media group may experience “weakness” this year and that Sky Global’s IPO wouldn’t occur in November as initially planned, because that didn’t give the company enough time to prepare for the sale.

News Corp. has talked with several companies since at least the first quarter about investing in Sky Global. The company said in March that it was talking with Microsoft, and other companies that include Yahoo Inc. and Nokia Oyj.

AT&T; Corp.’s Liberty Media Corp., a cable-programming company, agreed to invest in Sky Global last month. Murdoch said then that the stake would be valued at $40 billion after the offering.

News Corp. could raise $5 billion from the Sky Global sale, analysts have said. That would make the initial public offering the largest IPO for a media company.

Sky Global will include News Corp.’s satellite-TV services in Asia and Latin America. Microsoft rose $1.38 to close at $69.09on Nasdaq.