Microsoft Unloads Comcast Stake
Thus ends a financial partnership that never really turned into much of a cable set-top software footprint for Bill Gates & Co., which invested an initial $1 billion in Comcast in the summer of 1997.
Back then, Microsoft, as many might recall, had grand ambitions for getting its software into Comcast's set-tops, a strategy that started (and pretty much stopped) with the much-maligned Motorola Inc. (NYSE: MOT) DCT5000. After several attempts, it was finally determined that Microsoft's software and the hardware mixed like fire and gasoline.
That left hundreds of thousands of DCT5000s collecting dust, never to see the light of deployment day. At one point, the deal called for Comcast to buy up to 5 million licenses for MicrosoftTV's Foundation Edition set-top platform, though execution of that agreement never got anywhere near that number.
Microsoft's last connection to a Comcast box, for all intents and purposes, was severed in May 2007 when the MSO switched out the Microsoft Foundation Edition and interactive program guide (IPG) in Seattle and other parts of Washington in favor of a the "iGuide," a product of the Comcast-Gemstar GuideWorks LLC joint venture. (See Comcast to Drop Microsoft TV Guide
The MSO and Microsoft remain business partners, however, because Comcast continues to offer a bundle of "corporate grade" collaboration software to its small and mid-sized business customers. (See Comcast, Microsoft Get Down to (Small) Business .) Microsoft has also found the video set-top sledding a bit easier in the IPTV world, most notably with AT&T Inc. (NYSE: T) and its U-verse platform.
This string of episodes "left Microsoft on the outside looking in, with a purely passive investment" in Comcast, surmised Sanford C. Bernstein & Co. Inc. analyst Craig Moffett in a note issued today. "Indeed, for years, the Comcast investment had been 'non-strategic' at best… and problematic at worst."
Although some may think this divestment means Microsoft has completely lost faith in cable in favor of a strategy focused on IPTV partnerships and over-the-top video via its own Xbox360 console, Moffett thinks the move will remove an "overhang" on Comcast caused by investors worrying that Microsoft might liquidate its position and depress the MSO's shares.
"Perhaps the best that can be said is that now the overhang is gone," Moffett wrote. "And so too is the fiction that Microsoft will inherit the TV."
— Jeff Baumgartner, Site Editor, Cable Digital News