Is Microsoft Exiting This Market Or Just Shifting Gears?

People with knowledge of the matter tell Bloomberg that Ericsson (NASDAQ:ERIC) is inĀ talking to Microsoft (NASDAQ:MSFT) about buying its IPTV business. The transaction could be announced in a few weeks, but discussions are private so details are scarce.

Microsoft’s IPTV (internet-protocol television) business builds software that allows telecom companies like AT&T (NYSE:T) to transmit multimedia content over phone and cable networks. Microsoft’s IPTV platform, called Mediaroom, is already used by “more than 40 of the world’s leading operators, delivering services to more than eleven million consumer households equaling more than 22 million set top boxes deployed throughout the Americas, EMEA and APAC,” according to its website.

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It’s not surprising that Ericsson, a world leader in telecommunications, is interested in the business. The acquisition could help it compete with increasingly popular Internet-based multimedia services such as Netflix (NASDAQ:NFLX). One demonstration of Mediaroom’s success is AT&T, which uses the platform for its 4.5-million subscriber strong U-Verse. While content is ultimately the deciding factor in the success of a TV service, the underlying technology must be sound. Mediaroom could provide Ericsson that foundation…

The sale of Mediaroom doesn’t necessarily mean that Microsoft is exiting the TV business all together. Bloomberg indicates that people with knowledge of the company’s strategy are instead focusing on the Xbox, presumably branding it more as a multimedia machine that attaches to a television than simply a gaming console. Microsoft has already been busy striking content deals with various providers, such as Viacom (NYSE:VIAB) and Disney’s (NYSE:DIS) ESPN.

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The sources gave no word on how much the deal could possibly be worth, but Microsoft edged higher on Wednesday ostensibly aided by the news.

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