RadioShack Buys Back Microsoft Stake

Fort Worth, Texas-based RadioShack Corp., one of the most popular consumer
electronics stores in America, Friday bought back the 25 percent minority
stake software titan Microsoft corp. bought in it nearly two years ago.


RadioShack paid Microsoft, which originally bought the stake in November
1999, $88 million in cash for the interest and now has complete
ownership of itself. The value of the interest is lower than what Microsoft
paid for it back then — 12 million less to be exact. Microsoft paid
RadioShack $100 million in cash to make its already ubiquitous presence even
more visible through a “store within a store” strategy whereby Microsoft
centers would be featured in as many as 7,000 RadioShack locations across
the nation. The purpose of the agreement was to accelerate the adoption rate
of narrowband and broadband Internet access using Microsoft products and
services, such as MSN Internet Access, Microsoft WebTV Network services and
Windows CE-based personal digital assistants.


Customers were treated with demonstrations of dial-up or broadband Internet
access. To be sure, it seems impossible to get more exposure than
RadioShack — the company crunched some numbers and figured out that 94
percent of all Americans live or work within five minutes of a RadioShack
store or dealer.


At the time, when the .NET software-as-a-service initiative was perhaps but
a gleam in the software titan’s eye, Bill Gates, then serving as chairman
and CEO of his company, said: “By forming an alliance with RadioShack, we’re
reaching customers in a new way, giving them a unique opportunity to
experience and obtain online solutions through RadioShack’s trained
salespeople and expert home-installation team. This model for convenient,
one-stop shopping will allow us to greatly accelerate America’s conversion
to broadband services.”


As for RadioShack, the company agreed to the alliance and investment because
it wanted to emerge as a strong home networking retailer. While Microsoft’s
offerings would be highlighted at RadioShack outlets, Microsoft also pledged
to help RadioShack beef up its online presence to become a premier provider
of electronic goods and services on the Net. Microsoft had done the same for
Monster.com and 1800Flowers.com with its e-commerce software.


While Microsoft has in no way abandoned its home connectivity hopes, having
demonstrated numerous Net-connected rooms in the past year, it is clear that
its emphasis these days is on hawking the heavily-debated Windows XP
operating system and the .NET strategy, which seems to raise nearly as many
eyebrows as XP.


Although Microsoft no longer has a fiscal interest in RadioShack, both sides
claim the companies bear no ill will over Friday’s buy-back announcement,
claiming that their business relationship is still going strong and that the
other facets of the technology, services and marketing alliance remain
intact.


“Microsoft and RadioShack continue a shared a vision of helping people
integrate technology into their homes,” said Henry Chiarelli, senior
divisional vice president — emerging channels for RadioShack. “By
demonstrating end-to-end connectivity solutions at the Microsoft Internet
Center @ RadioShack and utilizing Microsoft technology to power
RadioShack.com, together we can help make the everyday Web a reality.”

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