MICROSOFT, MCI FORMING BROAD MARKETING LINK; NEW STRATEGIC ALLIANCE COULD BRING IN NEWS CORP. ONLINE

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MCI Communications Corp. and Microsoft Corp. are expected this week to announce a wide-ranging strategic alliance that could draw in MCI's online partnership with News Corp.

An MCI/Microsoft venture would represent a potent marketing force on both consumer and business fronts. For Microsoft, it would open up a direct pipeline to millions of MCI consumer and business customers; on the business side, the prospect of MCI's 6,000-person sales staff pushing Microsoft products is formidable.

MCI could become a major marketer of the fledgling Microsoft Network, the online venture that is migrating to the Internet. MCI already provides MSN customer service support.

"It sounds like a very promising alliance for both business and residential services because of the broad recognition and the customer bases," said Gary Arlen, principal of Arlen Communications.

In addition, iGuide, an Internet directory that is the flagship product under development by MCI/News Corp. Internet Ventures, could be bundled with MSN. A direct link to a beefed-up MSN could become a strong selling point of MCI's Internet access business.

A major MCI/Microsoft alliance also contributes to a blurring of competitive boundaries in telecommunications and media. For example, Microsoft's major equity partner in MSN is Tele-Communications Inc., the cable giant that also has a major relationship with MCI competitor Sprint Corp. for wireless telephone services. Microsoft chairman Bill Gates huddled with TCI President-CEO John Malone last Thursday, insiders said, partly to brief Mr. Malone on the MCI deal.

TCI also has a deal with News Corp. to broadcast and cablecast sports properties, and Fox sports content is part of MCI/News Internet Ventures.

An MCI/Microsoft alliance probably would increase the pressure for a major deal between AT&T and Netscape that could also involve America Online. Reports last week speculated AOL and Netscape are discussing working together.

AT&T already has a deal with Netscape to use its browser. Its president, James Barksdale, was formerly CEO of AT&T Wireless Services.

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