U.S. Seeks Info on Microsoft’s Bid for WebTV

WASHINGTON —  Microsoft Corp. has been asked by Justice Department antitrust investigators to provide more information about its proposed $425-million acquisition of WebTV Networks Inc.

The Justice Department move signals that federal antitrust officials are taking a close look at the transaction, and it extends the legal deadline for a required federal pre-merger review until at least 20 days after Microsoft and WebTV provide the requested information.

“We’ve received a request,” said Microsoft spokesman Mark Murray. “We intend to provide all the necessary information. We’re absolutely confident that when they’ve had a chance to review all this information, they will approve this merger in very short order.”

Palo Alto-based WebTV produces a system that lets people browse the Internet on their televisions. When the companies announced the acquisition in April, they said WebTV would use Microsoft technologies, such as its Windows CE software operating system for hand-held computers and entertainment applications.

Microsoft already has a $5-million stake in WebTV.

Among the things the Justice Department is looking into is whether the Microsoft-WebTV merger would impede competition in the developing market for software contained in set-top boxes or future TV sets that enable viewers to connect to the Internet, industry sources close to the investigation told the Associated Press. They spoke on condition of anonymity.

“We are looking at the transaction,” Gina Talamona, spokeswoman for the Justice Department’s antitrust division, confirmed Monday, but she would not elaborate.

WebTV Chairman Randy Komisar said he isn’t surprised the government wants more time to look at the transaction because the company operates in a cutting-edge market and nobody is quite sure what existing markets to compare it with when trying to assess the acquisition’s impact on competition.

“They clearly are going to spend more time looking at this,” Komisar said. “The real issue is figuring out the market.”

The Microsoft-WebTV deal comes as the computer industry and existing TV set makers race to define what the next generation of digital TV sets will look like.

The prize: $150 billion in spending needed to replace the existing 220 million analog TV sets in the United States.

The computer industry’s vision is essentially a large-screen computer that people use not only to get a crystal-clear TV picture but also to surf the Internet and send e-mail.

TV set makers have a different vision: a wide-screen TV with superior picture and sound quality but little, if any, computer capability.

Japan’s Mitsubishi Electric Corp. is working on a TV that allows people to connect to the Internet, and IBM is working on a version. Compaq Computer Corp. and Thomson Consumer Electronics Co. in April introduced a home theater product with a separate device that lets people cruise the Net from their TV sets.

Washington antitrust lawyer Garret Rasmussen said Microsoft is so big, and has battled the Justice Department for so long, that any significant move--such as the WebTV acquisition--is bound to draw attention.

“I’m sure there are a lot of people at the Justice Department who don’t trust Microsoft and don’t like Microsoft,” he said.

The Justice Department, Rasmussen said, may want to look at whether Microsoft sees the acquisition as a way to establish a new area of dominance by making its software the industry standard for use on technologies that bring together television and computers.

Microsoft shares closed at $115.125, down 31 cents on Nasdaq.