TEXT-Microsoft, Internet Gold to split on Israel portal

Sun Jul 6, 2008 2:50am EDT

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The following was issued by Micrsoft Corp (MSFT.O) and Israel's Internet Gold (IGLD.TA) (IGLD.O)):

July 6 - Microsoft Corporation and Internet Gold (Nasdaq: IGLD) (through its 100 percent owned subsidiary Smile Media Ltd) have reached an agreement to have Microsoft independently operate a MSN Israel portal.

Established during 2000, MSN Israel Ltd is 50.1 percent owned by the Internet Gold Group and 49.9 percent owned by Microsoft Corporation.

The parties are currently discussing the terms of migration and possible future cooperation.

The msn.co.il portal will continue to operate throughout the transition period and both parties are working together to support employees, advertisers and users through this period.

MSN is a global portal network which operates in 44 countries. In almost all of these countries the MSN portal is fully owned by Microsoft Corp. and only in a very few instances has Microsoft joined forces with a domestic partner to establish a local MSN portal.

In 2007, MSN Israel accounted for less than 3 percent of Internet Gold's total revenues. Eli Holtzman, CEO of Internet Gold, said today: "We have been happy to partner with Microsoft in establishing MSN Israel over the last eight years. Since then, we have developed MSN Israel into a leading portal in Israel. Given the change in the parties' online strategies we have agreed it makes sense for Microsoft to operate msn.co.il independently. We believe this is the right move for both parties and anticipate it will have a positive impact on our results."

"During the last few years, the Internet Gold Group has significantly expanded its activities in a variety of communications areas and, as a result, our MSN Israel operations currently represent a minor portion of the group's total revenues. Thus, we have decided recently to change course and seek alternatives for growth. We are continuing to actively examine new and financially significant areas of activity in and out of Israel, which have substantial growth potential and will drive our group to its next phase of business," concluded Mr. Holtzman.

Danny Yamin, General Manager of Microsoft, Israel, said today, "Our relationship with Internet Gold has worked well to establish strong foundations for our online business but both parties now feel that the time has come to operate independently to allow us both to deepen our impact on the Israeli market.

"We are very excited about our future in Israel and see some fantastic opportunities for growth and development of both the MSN portal and the Windows Live services. It is MSN's goal worldwide to deliver the best of local and international content -- integrated with our Windows Live services-- providing ways for consumers to interact and engage with MSN and more importantly, with each other. We call this 'the social portal.' Content is a very important part of this strategy and we will continue to partner with local and global premium content providers to deliver this."

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