The software giant's US$200 million stake in Qwest Communications International in 1998 is paying dividends--in experience and exposure, if not financially.
By contrast, the giant's highly touted US$5 billion alliance with AT&T has delayed joint initiatives and been clouded by uncertainty as Ma Bell has moved toward a four-way breakup. Other Microsoft investments, such as Winstar Communications and NorthPoint Communications, have failed miserably by ending in bankruptcy.
"It's easier to spot the disastrous investments, notably Winstar, rather than the ones that have paid off," said Dwight Davis, vice president at Summit Strategies, a market research firm. "Qwest would be one. It's a nice coup for Microsoft to have struck that strategic alliance."
Microsoft began taking stakes in communications companies, including Comcast and AT&T, in the mid- and late-1990s. The company initially intended the stakes as a way to infiltrate the communications market with its software. But, interestingly, its efforts to spur broadband use may be having at least as much success.
Picking a winner
The strategic alliance between Microsoft and Qwest, one of the US's larger long-distance phone and data carriers, is multipronged. It includes efforts in e-commerce, high-speed Internet access, Web hosting and software services based on Microsoft's Windows 2000 operating system.
Specifically, the Qwest partnership has generated tangible benefits for Microsoft in terms of software sales and new MSN Internet subscribers, based on the latest deal struck between the two companies.
The companies agreed to deliver MSN Internet Access via Qwest's high-speed DSL (digital subscriber lines) last week. Qwest already uses Windows 2000 in its Web hosting data centres and, most recently, was certified in March as a Microsoft Gold Partner among hosting companies and ASPs (application service providers).
"Qwest has built a whole infrastructure for Web services around Microsoft products. Qwest has been as successful as anyone in the area of application hosting," Davis said. "I think it's been a very positive relationship with Microsoft."
Analysts also point to Microsoft's US$50 million stake in Digex, a major Web hosting firm, as another on a short list of positive investments for the software giant. In fact, sources say Digex expects to operate 20,000 Microsoft-based servers by 2002, up from just 600 currently.
