Murdoch and Gates in talks over Microsoft investment in Sky Global

Bill Gates and Rupert Murdoch have held advanced talks about Microsoft making a $1bn (£688m) investment for a 3.5 per cent stake in Sky Global, the satellite broadcasting arm of News Corp, it emerged yesterday.

Bill Gates and Rupert Murdoch have held advanced talks about Microsoft making a $1bn (£688m) investment for a 3.5 per cent stake in Sky Global, the satellite broadcasting arm of News Corp, it emerged yesterday.

Mr Murdoch is understood to be courting Microsoft to reassure investors that the float of Sky Global can still go ahead despite the recent downturn in technology and media stocks. If Messrs Gates and Murdoch reach an accord on the current terms, it would value Sky Global at up to $35bn.

That would mark a sharp reduction from Sky Global's earlier proposed valuation of near $50bn. It would, however, be a major endorsement of Mr Murdoch's plan to create a valuable holding company and acquisition vehicle using News Corp's worldwide network of satellite interests.

Although neither company would comment officially, sources said the talks were progressing, however, it was stressed that no deal was imminent and that the talks could still be called off. Mr Murdoch is likely to address this and other questions concerning Sky Global when he chairs BSkyB's annual meeting on Friday.

News of the talks helped BSkyB stock close up 22p at 962p after a rally to 1,000p. News Corp's US-listed stock was up $1 at $42 ³/ ₁₆ at midday in New York.

For Microsoft, Sky Global would provide an additional platform to distribute interactive television software. In recent years, Microsoft has spent over $5bn buying stakes in cable television groups in Britain, Europe and the US.

News Corp has approached several investors, including France's Vivendi, which owns a 20 per cent stake in BSkyB, to raise cash for Sky Global prior to a flotation. Mr Murdoch said earlier this month that talks about a possible alliance had been held with DirecTV and EchoStar Communications, the two top satellite broadcasters in the US.

He recently concluded a deal with US cable tycoon John Malone whose Liberty Media has agreed to take a 4.8 per cent stake in Sky Global. In addition to BSkyB, Sky Global's principal assets include Star TV, an Asian satellite platform, as well as interest's in Sky Latin America, Italy's Stream, News Broadcasting Japan and listings company TV Guide.