Making its biggest push yet into a multimedia future, Microsoft has agreed to buy Californian start up WebTV for $425 million dollars.
The move will catapult Microsoft to poll position in the rapidly emerging market for Internet devices and give the bullish software giant a much broader audience for its Internet content and software.
According to Chris Champion, Internet and interactive services analyst at researchers the Yankee Group, Microsoft is eager to hasten the marriage between televisions and personal computers. ?We are reaching a plateau for Internet usage.? said Champion ?PC penetration is at 44 percent in the States and 11 percent across Europe. This is likely to rise to 50 percent in the US and 22 percent in Europe but then it will level out. Microsoft needs a broad base communications device to get the rest of the world online. WebTV is a great opportunity.?
Privately owned Internet service provider, WebTV develops technology that allows consumers to surf the Internet from their television sets. The company which makes its money purely on a subscription bases currently licenses its WebTV reference Design for set-top boxes to two vendors Philips Consumer Electronics and Sony Electronics. Analysts have estimated that more than 50,000 people subscribe to the service.
Industry watchers have hailed the merger as the next big step in digital broadcasting. ?It brings together TV, the computer, the web and interactive services.? said Champion. "Cable companies have been talking about developing an avenue to bring interactive services to everyone?s homes for years.?
For Microsoft, the acquisition is a vital piece of it?s multimedia puzzle. According to Craig Mundie senior vice president of Microsoft?s consumer platforms group the deal ?is part of a long-term process that Microsoft has been involved into create an operating system and tools for consumer electronics products,? He indicated that the WebTV offering would, over time, take advantage of multimedia versions of Windows CE, the company?s recently introduced operating system designed for a variety of mobile computing, entertainment and embedded applications.
The acquisition also cocks and snook at Microsoft?s arch rival Oracle in the market for Internet devices. The deal with WebTV fits nicely with the company?s recently announced plans to develop client and server software for a sub-$500 Windows terminal that will go head-to-head with Oracle?s network computers.
Officials at WebTV were said to be surprised and delighted with the deal. The company will operate as a subsidiary of Microsoft and retain its offices and staff in Palo Alto, California.
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