Investment Update

Microsoft has boosted its strength in wireless services, games, and Web services for consumers and businesses as a result of investments in the second half of FY’01. Most notably, Microsoft invested US$127 million in New Zealand’s Telecom and purchased gaming software company Ensemble Studios.

Telecom Could Boost Wireless Strategy

On May 11, Microsoft announced that it was investing NZ$300 million (about US$127 million) in Telecom, New Zealand’s formerly state-run postal and telephone company, which was privatized in 1990. As part of the deal, Telecom’s Xtra portal, which provides national news and information to approximately 370,000 users, will be merged with MSN New Zealand and will offer MSN services such as Hotmail, MSN Messenger, and MSN Search.

Telecom, which also owns number-three Australian telephone company AAPT, is a wireless leader in its region. It provides wireless phone service to more than 1.2 million subscribers and has recently entered a joint venture with a Hong Kong company, Hutchison Whampoa, to roll out next-generation (3G) wireless phone services in New Zealand and Australia. Microsoft is anxious to find buyers for its wireless-phone technologies for carriers, such as the Mobile Information Server, and to find carriers willing to sell smart phones based on the “Stinger” platform. The Telecom investment could provide it with a welcome test market.