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Matsushita, Microsoft Link on Boxes

Redmond, Wash. -- Microsoft Corp. scored another
consumer-electronics nod last Wednesday for its Windows CE operating system, when it
signed a nonexclusive memo of understanding with Matsushita Consumer Electronics to
collaborate on the use of Windows CE in digital TVs and set-top boxes.

Craig Mundie, senior vice president of Microsoft's
consumer-products division, said during a press teleconference that he expects
Microsoft's partnerships with Matsushita, under its Panasonic brand name -- as well
as its earlier agreements with Sony Corp. and Hitachi Corp. -- to accelerate the retail
and MSO-controlled availability of digital set-tops.

"You've already seen an indication that the cable
industry does seek participation of major consumer-electronics companies in building out
the number of products that will be required," Mundie said, adding, "While some
of the initial [cable] products are focused on traditional suppliers, like [General
Instrument Corp.] or [Scientific-Atlanta Inc.], I do think that you'll ultimately see
companies like Sony and Matsushita offering products, even in traditional [MSO]
distribution arrangements."

Mundie said he's not sure if consumer-electronics
companies will outrun GI and S-A, but "they will meet the demand that's

Yoshitomi Nagaoka, director of Matsushita's AVC
Product Development Laboratory, said he wants to work in tandem with Microsoft to develop
digital-cable set-tops for MSOs.

"We're also considering the retailing of these
set-tops," Nagaoka added.

The basic agreement on joint-development efforts covers
five main areas, executives said:

Next-generation personal-computer technology that
receives, decodes, processes and displays digital-TV broadcast signals;

A launch of WebTV Networks terminals in Japan in
time for the 1998 winter selling season;

Collaboration on the development of digital-cable
advanced set-top boxes;

Porting of Windows CE to adapted versions of
Matsushita's AM33 microprocessor chip series; and

Creation of a corporate-licensing policy that lets
Matsushita use Windows CE in multiple product categories.