Microsoft Grabs Digital TV Service Firm

Microsoft Corp. aimed to upgrade its
TV platform Tuesday with its purchase of digital TV service provider Peach Networks Ltd.

Financial terms were not disclosed.

Microsoft (MSFT)
inked the deal to increase its hold in the digital television sector.
Microsoft will couple its TV platform with Peach Networks’ technology to
enable shared services between present and future digital set-top
box designs.

Current digital STBs, which Forrester Research analysts estimate will be
used by 4 million U.S. subscribers by the end of this year, were designed
years ago when Internet-based services were not expected to be as
significant for TV viewers. Peach’s technology enables PC servers to deliver
new services to these current set-top boxes without wasting network
bandwidth. Advanced set-top boxes will be able to access the same content
and services, providing a basis for branded interactive services and
advertising to reach all digital set-top consumers.

Microsoft’s TV platform now includes a solution for basic digital set-top
boxes. The software giant plans to offer e-mail, communications, Internet,
shopping and entertainment applications to all digital network operators and
their clients.

Peach’s staff will be integrated into Microsoft’s TV platforms division,
where they will continue to develop innovative solutions for
enhanced television. Ofir Paz, president and chief executive officer of
Peach Networks, will be responsible for leading this effort. Peach
Network’s primary operations will remain in Israel.

“Microsoft has been evaluating technology solutions for digital set-top
boxes for years, and until now we haven’t found a solution that scales to
the levels our network partners demand,” said Phil Goldman, general manager
of the Microsoft TV platform group. “Peach’s offering excels over all other
solutions we evaluated and is the best in this space to deliver scalable
Internet and interactive services to digital set-top boxes.”

Microsoft’s assault on streaming media and interactive services took a stab
at the little guys today as it released, for the first time, its Windows
Media Player for handheld computers. The software is designed for
owners of Casio, Compaq (CPQ)
and Hewlett-Packard (HWP)
miniature devices.

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