FEDS' PLAN FOR MICROSOFT GROUPS MEDIA INTERESTS

By: Laura Randall FEDS' PLAN FOR MICROSOFT GROUPS MEDIA INTERESTS

MSNBC To Fall On Applications Side of Divided Company



(The Hollywood Reporter)
The Justice Department's proposed breakup of Microsoft into two
companies places most of the software giant's entertainment assets -
including MSNBC, its streaming media businesses, and its studio and
cable investments - under the applications side of the divided company.



The Justice Department and 17 states Friday asked a U.S. district court
to require Microsoft to be split into one company to produce the
Windows operating system and another company that sells software
applications. Microsoft has said it will appeal the April 3 ruling that
it repeatedly broke federal antitrust laws by using its monopoly power
in computer operating systems to crush competitors.



The government's proposal calls for the Microsoft applications company
to house the Microsoft Network, MSNBC, all Web browsers, Expedia Travel
Network, streaming audio and video software, Media Player, the online
magazine Slate, consumer hardware, and developer tools. It will also
cover all investments owned by Microsoft in connection with partners,
joint ventures, hardware and software vendors and information
technology and communications businesses.



Microsoft's hefty entertainment portfolio includes a $1 billion
investment in cable giant Comcast Corp., a $407 million next-generation
software deal with Canada's Rogers Communications, a $500 million
investment in British cabler NTL, a $30 million stake in Wink
Communications and a $15 million investment in DreamWorks Interactive.



The operating systems company would include Windows 95, Windows 98,
Windows 2000 Professional and the development, licensing, promotion and
support for computing devices, including personal computers, TV set-top
boxes, servers and handheld devices.



Placing Microsoft's content-driven businesses under the applications
umbrella makes sense, said Larry Gerbrandt, a senior analyst at media
research consulting firm Paul Kagan and Associates. 'As content and
applications blend themselves together, the further down the road you
go, the harder it gets to separate them,' he said.



One Microsoft asset that doesn't belong under the applications company
is WebTV, Microsoft's television-based online service unit, Gerbrandt
said. 'It's a first-generation product that bridges content,
applications and operating systems. It's not neatly divisible the way
the government would like it to be,' he said.



(Reuters contributed to this report.)