Microsoft tightened its grip on the UK's cable market this week, but analysts warned that despite its size and stature, the software giant faces tough competition in the digital broadcasting world.
Microsoft yesterday acquired 29.9 per cent of Telewest Communications as part of a complex transaction that saw the Redmond company take a $5 billion stake in US long distance operator AT&T. Microsoft already owns five per cent of another UK cable operator, NTL.
Digital TV networks provide a wealth of opportunity for Microsoft. It wants operators to use its WebTV set top boxes, running its Windows CE platform, offering packaged interactive services, such as communications, information and entertainment.
"Microsoft is looking to get the final connection to customers, then offer a full service package," said John Moroney, principal consultant at Ovum. "It's also part of Microsoft's strategy of being everywhere."
However, despite its dominance of the world's PC software markets, Microsoft faces tough competition in digital broadcasting, Moroney warned.
"Everyone falls over and says Microsoft is going to win again, only because it has got big pockets and a big name. But 20 years ago you could have said that about IBM. Success isn't guaranteed," he said.
Competitors including News Corp, Oracle, Mindport and Sun Microsystems are all developing platforms for delivering broadband content to the home.
"There's an army of people also out there in this market - let's not forget that," said Moroney.
But Microsoft could find itself in an even stronger position in the UK if, as widely rumoured, consolidation between the three market leaders - NTL, Telewest and Cable & Wireless - occurs.
A merger of some description is likely, said Moroney, but depends on the ability of the companies to broker a deal between themselves.
"These are companies that have their own goals, but there is a business logic to having a single cable supplier in the UK," he said.
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