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AT&T Discussed Buying Microsoft Network

AT&T Corp. and Microsoft Corp. have reportedly held discussions about AT&T buying Microsoft's online service and media properties.

According to USA Today, Microsoft Chairman Bill Gates and AT&T Chief Executive C. Michael Armstrong and President John Zeglis were all involved in the talks, which took place last fall. Sources told the newspaper AT&T's interest in buying The Microsoft Network has cooled although Microsoft sources said they consider the talks to be ongoing.

Both companies refused to confirm the talks took place.

AT&T was interested in merging MSN into AT&T WorldNet. There were also discussions about AT&T taking stakes in some Microsoft Web properties and the Web-based magazine Slate. Microsoft was said to be pushing for not only money but also a promise from AT&T that it would use Microsoft's Windows NT software.

Should a deal go through, it would essentially double the size of AT&T WorldNet, making it the No. 2 ISP behind America Online Inc. Analysts say the recent spate of consolidation in the ISP segment probably spurred the talks, as many feel AT&T needs a large acquisition to stay ahead of other fast-growing ISPs, such as MindSpring and EarthLink.

Analysts say one reason the deal might have been stalled was the fact that many of Microsoft's Web sites still lose money. They say it's understandable that Microsoft would be looking to unload them since they are outside its core business. MSN has also never been successful as an ISP.

MindSpring Chief Executive Officer Charles Brewer, when asked about the deal, speculated the two companies have probably had heated debates on the issue.

"There's probably been a lot of internal debate about selling it. If we do a future acquisition, it would be high on our list," he said.



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