Microsoft buys itself a place in the Internet's future

The purchase of a tiny start-up company for $425m is a crucial step for Bill Gates, writes David Usborne

Searching for ways to maintain its lead in home computing, Microsoft has paid $425m (pounds 261m) for WebTV, a tiny start-up company that sells devices that enable viewers to connect to the Internet through their television set.

The deal, though relatively modest in dollar terms, is being viewed as critical in several regards. Above all, it signals an effort by Microsoft's Bill Gates to position himself for the expected merging together over the next few years of the home computer, the television set and the Internet.

At the same time, it also puts Microsoft in the thick of the struggle just getting under way here to agree on new standards for digital, as opposed to analog, television technology. The battle has to be settled by 2006, the date set by the US government for the introduction of digital broadcasts.

It also further demonstrates the conversion of Mr Gates to the Internet. For a long period Microsoft stood aloof from the Internet rush until it felt suddenly threatened by companies growing out of it, like Netscape.

Indeed, the WebTV deal is Microsoft's largest Internet-related acquisition ever. Microsoft's Internet Explorer browser, developed in the face of Netscape's competition, and Windows CE operating system for pocket computers will be incorporated in WebTV products.

"This acquisition is the cornerstone of our long-term effort to combine the best of the Internet and the best of digital television technology," said Craig Mundie, Microsoft's senior vice president. "We want to take the personal computer and its progeny quickly into the home".

WebTV has developed the technology for set-top boxes that connect televisions to the Internet via a telephone line. About the size of an ordinary cable box and priced at about $300, the boxes allow viewers to use e-mail and surf the Internet on their televisions using a remote control.

In business only since 1995, the privately held WebTV counted Microsoft and one of its founders, Paul Allen, among its investors. Its boxes have been available since December and are made under licence by Sony and Philips.

For WebTV, the embrace of Microsoft will provide the heft to begin marketing its Internet technology in earnest worldwide. Microsoft officials believe that the cost of the box technology can quickly be brought down to $50 and that soon TV manufacturers will begin installing it inside their sets.

The stakes involved in both the digital television revolution and in the marriage of TV and the Internet are astonishingly high. The potential market for replacing all of America's TV sets with new digital versions alone will be worth as much as $150bn.

The issue of which standards should be used is crucial. For now, US broadcasters are pursuing a standard that will only provide for much clearer, home-theatre style pictures and sound, but nothing more. Microsoft is now joining a growing coalition in the computer industry demanding that the standards must also make the new generation of TVs Internet-intelligent.

It is not hard, meanwhile, to fathom the lure of television to companies like Microsoft. Currently, home computers have penetrated a little more than one third of America's homes - and merely 10 per cent of homes in Europe and Japan. Television, however, has found its way into 98 per cent of US homes (better even than the telephone).

Some analysts worry, never the less, that Microsoft is still uncertain of where to go next and indeed is following a schizophrenic strategy.

On the one hand, it is fighting to maintain consumer commitment to the full-blown personal computer - most of which, after all, are run on Windows operating system - while scorning the efforts of Oracle and Sun Microsystems to win us over to the much simpler and cheaper NC or network computer.

In many regards, however, an Internet-capable television set and the Oracle NC, which has no hard drive and derives all of its power and memory from the Internet, are pretty much the same product. The question: is Microsoft lost or is it cannily playing both sides of the game?

people'It can last and it's terrifying'
Danny Welbeck's Manchester United future is in doubt
footballGunners confirm signing from Manchester United
footballStriker has moved on loan for the remainder of the season
footballFeaturing Bart Simpson
New Articles
Olivia Colman topped the list of the 30 most influential females in broadcasting
Kelly Brook
peopleA spokesperson said the support group was 'extremely disappointed'
The five geckos were launched into space to find out about the effects of weightlessness on the creatures’ sex lives
Life and Style
techIf those brochure kitchens look a little too perfect to be true, well, that’s probably because they are
Andy Murray celebrates a shot while playing Jo-Wilfried Tsonga
TennisWin sets up blockbuster US Open quarter-final against Djokovic
Arts and Entertainment
Hare’s a riddle: Kit Williams with the treasure linked to Masquerade
booksRiddling trilogy could net you $3m
Arts and Entertainment
Alex Kapranos of Franz Ferdinand performs live
music Pro-independence show to take place four days before vote
ebooksAn unforgettable anthology of contemporary reportage
news Video - hailed as 'most original' since Benedict Cumberbatch's
Life and Style
The longer David Sedaris had his Fitbit, the further afield his walks took him through the West Sussex countryside
lifeDavid Sedaris: What I learnt from my fitness tracker about the world
Arts and Entertainment
Word master: Self holds up a copy of his novel ‘Umbrella’
booksUnlike 'talented mediocrity' George Orwell, you must approach this writer dictionary in hand
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SQL Implementation Consultant (VB,C#, SQL, Java, Eclipse, integ

£40000 - £50000 per annum + benefits+bonus+package: Harrington Starr: SQL Impl...

Head of IT (Windows, Server, VMware, SAN, Fidessa, Equities)

£85000 per annum: Harrington Starr: Head of IT (Windows, Server, VMware, SAN, ...

Technical Software Consultant (Excel, VBA, SQL, JAVA, Oracle)

£40000 - £50000 per annum: Harrington Starr: You will not be expected to hav...

SQL DBA/Developer

£500 per day: Harrington Starr: SQL DBA/Developer SQL, C#, VBA, Data Warehousi...

Day In a Page

'I’ll tell you what I would not serve - lamb and potatoes': US ambassador hits out at stodgy British food served at diplomatic dinners

'I’ll tell you what I would not serve - lamb and potatoes'

US ambassador hits out at stodgy British food
Radio Times female powerlist: A 'revolution' in TV gender roles

A 'revolution' in TV gender roles

Inside the Radio Times female powerlist
Endgame: James Frey's literary treasure hunt

James Frey's literary treasure hunt

Riddling trilogy could net you $3m
Fitbit: Because the tingle feels so good

Fitbit: Because the tingle feels so good

What David Sedaris learnt about the world from his fitness tracker
Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Second-holiest site in Islam attracts millions of pilgrims each year
Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York
Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

'I like Orwell's writing as much as the next talented mediocrity'

Will Self takes aim at Orwell's rules for writing plain English
Meet Afghanistan's middle-class paint-ballers

Meet Afghanistan's middle-class paint-ballers

Toy guns proving a popular diversion in a country flooded with the real thing
Al Pacino wows Venice

Al Pacino wows Venice

Ham among the brilliance as actor premieres two films at festival
Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

Neil Lawson Baker interview

‘I’ve gained so much from art. It’s only right to give something back’.
The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering