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Microsoft CFO to dash to RoadRunner

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Greg Maffei, Microsoft's CFO, is believed to be trying to jump ship to join RoadRunner, the cable modem Internet service owned by Time Warner (the biggest US cable operator) and MediaOne. However, Bill Gates is apparently objecting to Maffei's departure on the grounds that as a ten per cent shareholder, the CFO has the right to veto who is appointed as Microsoft's CEO. Mafffei is one of the inner circle at Microsoft, and privy to all the secrets. Gates is always concerned about losing an executive to another company, although burnout and the fruits of financial independence have played their role in the past. Maffei has already done quite nicely from his stint at Microsoft, but there is an opportunity for him to lead an IPO for RoadRunner in which he could potentially make hundreds of millions. That's one theory, but it may not be the whole story. Being in charge of (or worse, being legally responsible for) Microsoft's financial statements is an unenviable job. The SEC has cast its eye over Microsoft's finances and promotional activity in the past, and it is a much tougher opponent than the DoJ, which has to play an outdated set of rules, with political interference thrown in for good measure. Politicians do not mess with the SEC, lest their own activities receive reciprocal investigation. It would not therefore be surprising if Maffei had two reasons for wishing to depart: money, and avoiding responsibility for accounting practices that might be questioned in the future. Along with Microsoft, Compaq also has a ten per cent stake in RoadRunner, putting up $212.5 million, and it would not be surprising if it wanted to realise its investment through a public offering. Time Warner's involvement is complicated: it has about nine per cent itself, and Time Warner Entertainment (through Time Warner Cable, in which MediaOne is a partner) will have an additional 20 per cent. Advance/Newhouse holds 26 per cent in conjunction with Time Warner Entertainment. MediaOne separately has 25 per cent. So that's clear. Earlier plans were rather different: Oracle and Intel were poised to be software and hardware partners in May last year, but Microsoft came along offering to take 20 per cent for $400 million. There was concern that Microsoft would be able to exert end-to-end control, so it was told that a hardware partner was needed, hence Compaq, with Digital being the systems integrator. In Hawaii, Time Warner uses Microsoft's Commercial Internet System based on NT, and Digital is also the integrator. Microsoft's interest would appear to be in the significant revenue stream that could be generated if the venture becomes successful. Last month, MediaOne and Comcast proposed a $48 billion merger, but Comcast (controlled by AT&T) itself controls the rival @Home service. One possible solution is that RoadRunner and @Home will try to merge, if allowed by the FTC/DoJ, which is where Maffei's negotiating toughness may help. ®

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