Microsoft said on Monday it invested US$200 million in Qwest Communications as part of an agreement between the companies to offer Web hosting, electronic commerce, and computer network management to customers.
Qwest (QWST), the fourth-largest long-distance telephone company in the United States, will offer the service in the second quarter of 1999.
Qwest said it expects to generate about $150 million in revenues from the service during the first two years, most of it in 2000. It also expects a small loss in 1999 and a small profit in 2000.
The service is geared toward companies lacking either the technical or financial resources to build internal networks that use the Web for selling products and running businesses, said Qwest CEO Joe Nacchio.
"We saw that Qwest was developing a very new high-speed, high-quality network that we think will be the new backbone of Internet services," said Thomas Cole, vice president of Microsoft's Internet customer unit.
In late morning trading, Qwest shares were down $1.56 at $41.81. Microsoft dropped $3.88 to $130.13.
The service will be based on Microsoft's Windows NT operating system, offering a showcase for Microsoft's (MSFT) flagship software.
The companies will offer e-commerce applications, e-commerce hosting, general business applications like databases and accounting software, and video streaming.
Pricing of the services will be established over the next several weeks, Nacchio said.
Microsoft rival Oracle has been testing a similar service since mid-September and plans to market it primarily to small and medium-sized businesses.
The foundation of Oracle's service is its 8i database. "[This announcement] is about driving market share for Windows NT," Cole said.
