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Microsoft on a Binge: Another Streaming Purchase Rumored in the Pipeline

By Jeffrey L. Newman
Staff Reporter

Just days after announcing that it will take a 10% stake in one of the leading real-time audio and video streaming companies,



Monday, this one is even more curious, as closely held VXtreme has almost no revenue and a very small presence in the marketplace. In fact, the company has only one product available, Web Theater, a streaming audio and video software. The product competes with Microsoft's NetShow and Progressive's Real Video, as well as VDOLive from closely held


, another video streaming company in which Microsoft has a stake.

Does Microsoft, the king of conquering standards, believe in video streaming? After this deal, the company would have an alliance or financial stake with all but two of the major video streaming companies out there.

"If they do acquire VXtreme, which I'm sure they will, Microsoft gains the opportunity to control the standard," says Peter Dougherty, president of closely held

Duplexx Software

, whose Nettoob software competes with Real Audio and Video. "They've extended themselves into cable and


. This is a precursor to all those technologies converging. They're staging themselves to participate in each point along the way to that convergence."

Jim Feeley, features editor of

Digital Video

magazine, says VXtreme may have some proprietary technology that Microsoft wants. "There must be something more going on there than what meets the eye."

Staffan Ericsson, co-founder of

VIVO Software

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, one of the leading creators of content creation tools for the Web, agrees. "

VXtreme has no presence in the marketplace," says Ericsson, who has heard the acquisition rumor. "They haven't been able to build up business and very few sites use their products. If Microsoft is acquiring them, it would be because VXtreme has some technology they need." Last year his company formed an alliance with Microsoft in which its product would be used with Microsoft's NetShow.

"It's been foreseen for a while that there will be a consolidation in this market," Ericsson adds. "If Microsoft is looking to expand their presence in this space, it would be a logical move."

No one at Microsoft or VXtreme would confirm or deny the possible acquisition. But a Microsoft manager said that VXtreme would be an enhancement to the company, especially since VXtreme has agreed to make its products compatible with the ASF platform, Microsoft's proprietary format for digital video.

"They're a company we've worked with very closely. They are very active in the streaming format," says Michael Ahern, a lead product manager with Microsoft. "We're working with different companies that have different technologies. The longer-term consequences of this will be that it will help with future

Microsoft efforts."

Danny Rimer, an analyst with

Hambrecht & Quist

, who is in Seattle for Microsoft's annual analysts fete, says an acquisition like this would further Microsoft's master plan.

"Microsoft is looking for any extension of its Windows platform," he says. "It is working on providing Windows everywhere, and along that path are PCs, Net PCs, WebTV and their investment in




:Nasdaq). This type of purchase would be an extension of that. The fact is, they own the majority of PCs out there and they're trying to push up through the marketplace by moving into these other areas."

Digital Video's

Feeley says the acquisition would also reflect Microsoft's fascination with digital TV. "This really ties in to Microsoft's purchase of WebTV. Microsoft really wants to set the standard for digital video and they're pretty sure that the Internet will play into that. They may feel that this gets them another step closer to that goal."

And with another firm under its expanding belt, it brings Microsoft that much closer to becoming a puppeteer who is pulling all the strings.

"If you own all the players, then there's no one to compete with," says Duplexx's Dougherty. "If you can hold everyone else's hand, you can control the way they do things."