Bill's Eye On The Eye?

THERE'S ABSOLUTELY NO TRUTH TO it.'' ""It's not happening.'' ""There's no deal. No one's looking at a deal.'' So declared the various spokespersons for Microsoft, CBS and its parent, Westinghouse Electric, dismissing a report that the ubiquitous Microsoft Corp. was eyeing yet another acquisition - the venerable CBS television network, worth some $14 billion. Westinghouse's stock jumped nearly 10 percent on the supposed news, before falling back in the face of emphatic denials. But it was a testament to Microsoft's power that for several hours last Tuesday, the technology world all but stopped as analysts, investors, reporters and managers scrambled to sort fact from fiction.

Maybe it was just one of those wild Wall Street rumors. Skeptics were quick to impugn the source: the tabloid New York Post. Others noted legal and practical hurdles. Federal regulators might bar Microsoft from taking a stake in a broadcast network. And Microsoft is already tied to CBS rival NBC through their joint cable venture, MSNBC. The head of NBC's cable group, Tom Rogers, calls the report ""balderdash,'' adding that their agreement would prevent the software company from linking with a competitor. One cable magnate, on hearing the report, went straight to the ultimate source, Microsoft chairman Bill Gates. He reportedly dismissed the rumor in one tart word, starting with ""B.''

Still, there may be an element of truth here, albeit not as reported. For months Microsoft has been talking to CBS and other networks about setting technical standards for the coming era of digital television. Without going into arcane details, Microsoft and the computer industry (supported by ABC) favor something called progressive scanning, a transmission technology that would allow computers to display digital TV signals. CBS and other broadcasters, by contrast, favor a rival technology known as interlaced scanning, which would not allow computers to double as TVs. The stakes in this disagreement are huge - prompting some analysts to speculate that Gates might indeed go after CBS at some point, if only to nudge the debate in his direction. ""I don't think Microsoft wants to get into the broadcast business or buy CBS, certainly not at $14 billion,'' says analyst Rick Sherlund at Goldman, Sachs. ""The goal is much narrower: to influence standards for the new generation of digital TV.'' If that eventually means buying a stake in a network, much as Microsoft owns 11.5 percent of cable operator Comcast Corp., it might be a good investment.

So for now take Microsoft at its word. But don't be surprised if plans change.

Microsoft is emerging as a big player in the media game. Besides acquiring WebTV, it has its hands in ither ventures.

WebTV: The cornerstone of Gate's plan to combine the Internet and digital TV.

Comcast: A $1 billion in investment in the fourth largest cable operator.

MSBET: (BET) Joint interactive venture with Black Entertainment Television.

MSNBC: (NBC)) Global 24-hour cable news network and online service.

DreamWorks Interactive: (DreamWorks SKG) Software company creates interactive entertainment.