Microsoft announced Monday it is investing $600 million in wireless service provider Nextel Communications to launch an Internet portal for communication devices such as cell phones and pagers.
Under terms of the deal, the software giant is buying a 5% stake in Nextel in common stock, making the company Microsoft’s first provider for its new wireless portal, set to launch later this year with the next major upgrade of the MSN Web site.
Through the agreement, Nextel’s 3.2 million customers will have access via cell phones, interactive pagers and wireless PCs to Microsoft’s MSN network of Internet services, such as e-mail from Hotmail, weather and sports from MSNBC and calendar services from Microsoft’s recently acquired Jump Networks. E-commerce offerings will bow in the near future.
In return, Nextel will have the Microsoft name attached to its network. The nonexclusive deal, however, allows Microsoft to invest in Nextel’s competitors.
The deal is expected to put a considerable dent in the $7 billion debt Nextel amassed after trying to finance expansion of its telecom networks, and for research and development into new wireless products and services.
Shares of Nextel rose 56¢ to $36.94 on the news.
The announcement comes less than a week after phone giant MCI WorldCom ended talks to buy Nextel for $13 billion.
Deal also signals Microsoft’s growing expansion beyond computer operating systems and into the telecommunications delivery arena. Microsoft last week announced it will enter the cable game, investing $5 million in AT&T to incorporate its Windows CE operating system in future cable set-top boxes.
More announcements are expected in the coming weeks as Bill Gates continues his spending spree.