RealTime IT News

Microsoft Acquisition Rumors Boost OpenTV

[Johannesburg, SOUTH AFRICA] Microsoft has not responded to market speculation that it is contemplating buying MIH Holdings subsidiary OpenTV, although rumors to this effect drove up MIH shares by 10% on the Johannesburg Stock Exchange on Wednesday.

MIH Holdings reported a 10.6% gain in yesterday's trade on the JSE, closing up 370c (US $0.53) to R38.50 (US $5.54).

Speculation of a Microsoft bid for the interactive television company abounded this week after The Wall Street Journal reported that the U.S. software company has delayed the delivery of its interactive software to AT&T, forcing the networking supplier to consider other sources.

Two of the most obvious sources would be OpenTV as well as rival Liberate Technologies, a U.S.-based company that also reported gains in its share price yesterday amidst speculation of a Microsoft bid.

As analysts remarked, an outright acquisition of either of these companies would not only enable Microsoft to meet its existing commitments, but would provide the company with established interactive expertise and an entrenched client base. Microsoft's set-top box offering, Microsoft TV Advanced Digital, levers off the company's Windows CE operating system, but this new technology is still considered relatively untested.

The same cannot be said of OpenTV's offering. The company's software has been licenced to 34 television channels, with over 9,3-million set top boxes installed worldwide. With this list of television networks including the U.K.'s BSkyB, the U.S.'s Echostar DISH Network, Germany's PrimaCom and Sweden's Senda, the company already has a well-established operation with technology that has already been put to the test.

There are two additional attractions for Microsoft. In 1999 OpenTV ported its digital interactive operating system to the Motorola DCT-2000, the most widely-used set top terminal in North America, available in over 5 million homes. With Microsoft's base of operations in the U.S., the market share which OpenTV enjoys in North America would surely prove a temptation to the software company.

The other attraction would be OpenTV's partnership with Spyglass. The merger between the two companies earlier this year cost OpenTV $2.5 billion but gave the interactive television firm access to Spyglass' interactive mobile services. Spyglass currently has an exclusive marketing agreement to sell the WAP Microbrowser to mobile handset manufacturer Nokia.

Analysts quashed speculation on Wednesday, however, saying that even in the unlikely event of Microsoft bidding for OpenTV, indications are that MIH would not wish to divest itself of this lucrative division of its business. OpenTV is owned by the Nasdaq-listed MIH Limited, which is 59% controlled by the South African company MIH Holdings. MIH, in turn, is 55.8% held by media conglomerate Naspers, which has never indicated any intention of diluting its vicarious stake in OpenTV.

Despite analyst opinion, OpenTV and MIH Ltd Director Alan Rosenzweig refused to be drawn on the truth of the rumours. Rosenzweig claimed that it was not "policy" to comment on rumours of this kind, which he said proliferate due to OpenTV's position as a market leader in the interactive services sector. Neither could comment be solicited from Microsoft representatives yesterday.