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MS finalises Nextel stake

The company's building up quite a portfolio in wireless

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Microsoft announced on Friday that it had completed its $600 million investment in Nextel [see 11 May story] by acquiring a 4.25 per cent stake of 16.67 million shares for £36 each - a loss so far of $23 million as the share fell on the news. Nextel customers will be able to receive the latest incarnation of MSN using Motorola's i1000 phone, which should be a blessing for Motorola. Nextel needed some such deal as it was falling behind paging competitors like SkyTel and BellSouth Wireless Data. Microsoft, which is none too keen for its own partners to work with competitors, also owns some 5.67 per cent of SkyTel, following share cumulation over the past four years. But that's not all: Microsoft is also an investor in Wireless Knowledge, with Qualcomm, to develop a CE-based cellular service. It's strange to see Microsoft creating such competition in a generally loss-making market, but it does show just how keen Microsoft is to make its mark in wireless communication. It needs another source of income like the DOS/Windows tax, and it looks like it plans to get this from an ever-increasing share in access services. Further complication to the scene comes from Craig McCaw, who is a major NexTel shareholder but also a major shareholder (with Gates, personally) in Teledesic, the satellite venture scheduled to go live in 2002, providing enough satellites can remain operational. It seems likely that Gates' plan is to get the wireless network going as an interim measure, and back up Teledesic with wireless, in case the satellite failure rate is too high for continuous service. One advantage of such a network is that it could give higher level of security that the present Internet, although the US National Security Agency's ability to listen to satellite and wireless traffic is another matter. ®

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