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Tuesday, February 15, 1994 - Page updated at 12:00 AM

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Microsoft To Purchase Softimage -- Software Giant Gains Access To Graphics For Interactive TV

Microsoft's move to buy a Canadian company whose software was used to produce the blockbuster movie "Jurassic Park" shows that the Redmond giant is not one to become a dinosaur among software companies.

In its second-largest acquisition ever, Microsoft agreed to buy Montreal-based Softimage Inc. in a stock-swap deal valued at about $130 million.

Softimage is one of the leading companies making software capable of creating stunning, two-dimensional and three-dimensional animation, as well as melding animated characters with real-life movie images. Besides being popular among Hollywood producers, its largest customer is Sega Enterprises Ltd., whose video games have become increasingly lifelike.

Microsoft is buying more than technology. In a world where computers capable of "Jurassic Park"-type graphic tricks may be on desktops within half a decade, Microsoft's move gives it access to the minds who created that technology.

"You don't just hire folks that have this stuff," said Dain Bosworth analyst Glenn Powers. "It's the type of thing where there are 100 people that are good. If you want to get a bunch of them at once, this is the way you grab them."

Nathan Myhrvold, Microsoft senior vice president, said yesterday that the acquisition will give Microsoft a tool to create sophisticated computer-generated graphics that are going into movies, video games and commercials. Also, he said, "This kind of technology is the minimum (needed) to create effective CD-ROM titles."

Softimage's market is high-end graphics designers. Its software costs $10,000 to $50,000, and the workstations that run it cost from $50,000 to $100,000.

But Microsoft is betting that the software will someday be used to create the images that flow over the "information superhighway," the confluence of computer, television and telephone services that many expect will put everything from banking to shopping to video on demand in many homes.

The bet is an important one to Microsoft, which has pledged to spend what it takes to be part of the new technology.

"To take advantage of the opportunity the information highway provides, we are going to have to hire a lot more people," Myhrvold said.

Myhrvold refused to say the acquisition is a signal that Microsoft has shifted its strategy toward growth by acquisition rather than by internally generated products.

But he acknowledged that Microsoft opted to make the acquisition after rejecting plans to develop the type of software that Softimage makes. He said the deal is a "pretty dramatic vote" for acquisitions.

In 1992, Microsoft acquired Fox Software for $175 million.

Softimage has 180 employees and reported profits of $2.9 million on sales of $28.9 million in fiscal 1993, which ended in October.

Microsoft's offer, which will end up at $21 to $24 a share, is well above Softimage's recent stock price of about $15 a share.

Softimage's directors and senior officers, who own about 30 percent of the company's shares, have voted unanimously in favor of the acquisition.

Softimage's stock was trading at $21.25, up $6.125, in late Nasdaq trading today.

Copyright (c) 1994 Seattle Times Company, All Rights Reserved.

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