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. Last Updated: 07/27/2016

Microsoft, Tandy In Internet Agreement

NEW YORK -- Microsoft Corp. has unveiled a new plan to sell Internet connections to the masses, not through the traditional means of mailing out millions of disks or bundling access with a new computer, but by selling directly to consumers through Tandy Corp.'s 7,000 Radio Shack stores.

Beginning late next year, Microsoft will set up boutiques inside Radio Shack stores to sell its Internet services - from regular modem connection to high-speed DSL - and a range of Internet products, such as WebTV, Windows CE hand-held computing devices and a soon-to-be-announced Internet terminal.

By using Radio Shack's 30,000 salespeople, Microsoft hopes to make a direct connection to sell its MSN service to consumers who have yet to go online.

A key component of the plan is a Radio Shack service that specializes in installing equipment and Internet access, giving consumers the ability to connect without the usual headaches of configuring their systems themselves.

Microsoft chairman Bill Gates said the partnership with Radio Shack was an important step in fulfilling Microsoft's vision of the weaving of the Internet into parts of everyday life.

"Radio Shack has a leadership position in reaching out to the American home,'' said Gates in a conference call Thursday announcing the Radio Shack partnership. "We reached out to Radio Shack to make this everyday web a reality.''

The news helped drive up Tandy's stock $4.19 to close Thursday at $69.38 on the New York Stock Exchange. Microsoft's shares closed up $2.50 at $89.63 on Nasdaq.

The agreement dispels rumors that Tandy was planning a similar agreement with America Online, under which the online service would be Radio Shack's preferred Internet service provider, or ISP. Although Radio Shack stores feature personal computers made by Compaq Computer Corp. that come loaded with AOL software, customers will not be aided in subscribing to AOL, but they will be encouraged to sign up with MSN, said Leonard Roberts, Tandy's chairman, president and chief executive.

"The economic model with Microsoft definitely won out,'' Roberts said in a telephone interview. "While we went looking for an ISP partner, what we needed was a total connectivity partner. The logical and only choice was Microsoft.''

Analysts said the deal was a win-win that would help Microsoft spread its Internet business to a mass market. At the same time, they said it would establish Radio Shack's credentials as an online services provider, much the way its partnership with Sprint helped make it a powerhouse in cellular phones, where it claims 70 percent of retail sales.

"The resurgent Tandy has done a beautiful job with the store-within-a-store concept for Sprint and Compaq, and I think Microsoft recognized that,'' said Seymour Merrin, president of Merrin Information Services. "It's really a unique entity, Radio Shack, and this sort of thing will play very well there. This should be a win-win, and the customer can't lose.''

Microsoft and Tandy have actually had a close relationship dating to the early days of the personal computer, when the then-fledgling software company provided a version of the basic programming language for the TRS-80, an early PC. Microsoft also created the simple operating system and applications for the Radio Shack Model 100, a pioneering notebook computer.