Microsoft Acquires Stake in Nextel Communications for $600 Million

Strategic Insights -

Microsoft has acquired a 4.25% stake in Nextel Communications for $600 million, marking a significant deal in the wireless phone industry. The two companies plan to collaborate on providing Internet services for Nextel's wireless phone users, including a Nextel-branded version of the MSN Web portal. This deal comes just days after Nextel ended merger talks with MCI WorldCom, leaving some analysts wondering if this could drive up the asking price for Nextel. F. Drake Johnstone, an analyst with Davenport and Co., believes that this deal raises the stakes for potential buyers, as every day of delay will result in a higher price tag.

Key Takeaways:

  • Microsoft acquired a 4.25% stake in Nextel Communications for $600 million, valuing Nextel's shares at $36 each.
  • The deal includes the creation of a Nextel-branded version of the MSN Web portal, providing e-mail, calendar, and address book functions for Nextel's Internet-ready phone.
  • Nextel will continue to build and improve its wireless network using the $600 million from Microsoft.
  • The Microsoft deal may drive up the asking price for Nextel, as every day of waiting to place a bid will result in a higher price tag.
  • The deal is seen as a strategic move by Microsoft to expand its presence in the wireless phone industry.
  • Nextel-branded wireless customers will gain access to timely or triggered notifications of stock quotes, sports scores, and other news and information through the Nextel-branded MSN portal.
  • The deal was announced on Monday, and Nextel's stock rose 56 1/4 cents to $36.93 3/4 on the Nasdaq Stock Market.

Statistics:

  • $600 million: The amount paid by Microsoft to acquire a 4.25% stake in Nextel Communications.
  • $36: The value per share of Nextel's stock at the time of the deal.
  • $36.37 1/2: The closing price of Nextel's stock on the previous Friday.
  • $45: The reported price tag that Nextel was seeking to be acquired by MCI WorldCom.
  • 56 1/4 cents: The amount by which Nextel's stock rose on the Nasdaq Stock Market on Monday.
  • 4.25%: The stake acquired by Microsoft in Nextel Communications as a result of the deal.

Sources:

  • "Microsoft Acquires Stake in Nextel Communications for $600 Million" - (no date specified)
  • "Davenport and Co." - F. Drake Johnstone, Analyst (no date specified)
  • "Nasdaq Stock Market" - (no date specified)