Microsoft Goes To DSL By Taking $30 Million Rhythms Stake

Microsoft Corp. this week agreed to a $30 million equity stake in high-speed
networking provider Rhythms NetConnections
Inc.
and will offer the DSL provider’s
customers with a co-branded MSN portal.

The announcement marks the Redmond, Wash., giant’s first foray into the DSL
market, although the company has several high-speed cable ties with
Comcast, Road Runner and Qwest Communications.

The co-branded MSN portal is slated to debut this summer. With the new
service, Microsoft customers can gain quick access to the Internet and
private networks, and additional services.

Customers of Rhythms’ enterprise “teleworker” and small-business services
will be enabled with a MSN Hotmail
Web-based e-mail account and other communications services, which
will be bundled into the co-branded portal.

Other portal services will
include Microsoft
Passport, MSN Search and Windows Media Technologies. Additional technologies
in development include multimedia
communications for business and teleworker portals, and a
virtual laboratory linking both companies’ testing facilities that certify
high-bandwidth,
network-based applications.

“Businesses
large and small are looking to
provide their employees with a full set of integrated services that span
desktops at work and access to the
same capabilities at home for teleworkers,” said Thomas Koll, vice
president of Microsoft’s Internet customer unit.

Rhythms launched with financial backing by Kleiner Perkins Caufield &
Byers, Enterprise Partners, The
Sprout Group and Brentwood Venture. Enron Corporation also holds an equity
investment in Rhythms.

On Feb. 16, the Englewood, Co.-based company announced it planned an
initial public offering managed by Merrill Lynch & Co., Salomon Smith
Barney, Hambrecht & Quist and Thomas Weisel Partners LLC. The IPO is
expected sometime later this month.

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