SEATTLE -- Microsoft invested $100 million in Radio Shack's online business yesterday in a deal that will put the software giant's MSN Internet products in 7,000 Radio Shack stores.
Microsoft beat out online rival America Online, which was also trying to land its service in Radio Shack outlets, owned by parent Tandy Corp.
Microsoft will have a store-within-a-store at Radio Shacks, showcasing such Microsoft products as its MSN Internet access service, WebTV and hand-held computer devices that run on Microsoft's Windows CE operating system.
Tandy, which already has store-within-store deals with Compaq and Sprint, initially sought an Internet service provider for a partner, said Tandy Chairman Leonard Roberts.
But Microsoft brought along partnerships with high-speed data companies such as NorthPoint Communications, and it came to the table with a hand-held-device business. Roberts said companies such as America Online, even with its 19 million subscribers, didn't match up.
"While we thought we were looking for an ISP partner, we found much, much more," Roberts said.
The deal will completely cut off America Online's access to Radio Shack stores, and by next summer, the Compaq computers Radio Shack sells will no longer come loaded with AOL software.
The deal helps Microsoft push its Internet business to the masses. MSN, with fewer than 3 million customers, will get broad distribution. The company will push high-speed broadband service in the deal.
Shares of Fort Worth, Texas-based Tandy soared more than 9 percent on the news, rising $6.25 to $71.4375 on the New York Stock Exchange. Shares of Microsoft rose $2.50 to $89.6250 on the Nasdaq stock market.