Why TransPoint Was Sold

The proposed sale of TransPoint to CheckFree seems at first glance to run counter to Microsoft’s proclaimed strategy of focusing on back-end Internet technology and services. TransPoint is the electronic billing and payment joint venture between Microsoft and First Data Corporation, with Citibank as a minority investor. What drove this sale? Given the dynamics of a market that is set to take off but stuck on the launch pad, the short answer is: pragmatism.

Assuming the deal closes, which is likely to take four to six months, the three TransPoint partners together will receive 17 million shares of CheckFree’s stock, about 23% of the Atlanta-based company. (See “TransPoint Sold to CheckFree” on page 18 of the Mar. 2000 Update.) Lewis Levin, president and CEO of TransPoint and a vice president of Microsoft, will have a seat on CheckFree’s board of directors. Following the boost to CheckFree’s stock that the sale announcement provided, the TransPoint partners’ stake in CheckFree was worth more than US$1.5 billion by the beginning of March. Although Intuit—Microsoft’s main rival in the personal financial services software sector—sold off some 3 million shares of CheckFree immediately after the sale, it still owns almost 14% of the company.