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Microsoft Spins Off First Web Stock
September 23, 1999 – Fueled by internet companies doing well on Wall Street, Microsoft plans to spin off its Expedia online travel service. Microsoft announced today plans to sell stock in the division to the public.
This marks the first time Microsoft will spin off one of its divisions into a public company, allowing it to take advantage of a stock market that has done well by online ventures. According to the company’s filing with the Securities and Exchange Commission, Microsoft is hoping to raise up to $75 million from the offering.
Expedia is an online travel agency which allows users to plan trips, purchase tickets and make travel reservations. Expedia has become one of Microsoft’s most popular Web offerings, with 7 million registered users by the end of August.
Since it was launched in October 1996, Expedia has recorded $700 million in gross bookings in airline, hotel and car-rental reservations. In fiscal year 1999, which ended in June, the service had a net loss of $19.6 million on net revenues of $38.7 million. That compares with a loss of $29.4 million loss on net revenues of $13.8 million the previous year.
Microsoft Vice President Brad Chase announced the plan. Citing regulatory restrictions on discussing pending offerings, Chase declined to discuss Microsoft’s reasons for the stock sale. But he did say Microsoft wants to seed the market for online services to help extend opportunities for Microsoft technology.
Expedia founder Richard Barton will be president and chief executive and Greg Maffei, Microsoft’s chief financial officer, will be chairman of the company. Microsoft will also retain majority ownership.
Although Expedia will become a separate company, it will have a contractual relationship with Microsoft to provide travel services on the msn.com Web site.
As part of a daylong event, the announcement came today outlining Microsoft’s latest version of its Internet strategy, “The Everyday Web”. Core to the strategy is the notion that the company sees software as a service that computer users can access online and tailor to their own needs. “We think it fundamentally changes the way we look at our business,” said Group Vice President Rick Belluzzo.
The Internet-strategy day was something of a coming-out event for Belluzzo, who became Microsoft’s Internet chief less than a month ago after serving as chief executive of computer maker Silicon Graphics.
Today Microsoft President Steve Ballmer, at a separate event, iterated how the company is evolving to focus on software as service. Microsoft will work to provide a platform to coordinate software, available on the Internet, that people could use to better their lives, Ballmer told a technology conference of the Society of Business Editors and Writers meeting in Seattle.