Microsoft is withdrawing its three board members from Telewest, the embattled UK cable firm.

The US software giant owns 23.6% of Telewest, giving it the right to nominate up to three representatives to the board.

In a statement, Microsoft said it believed it would be in a better position to manage its relationship with, and investment in, Telewest without board representation.

It said it was still considering selling Telewest shares or "engaging in possible strategic transactions involving Telewest" although it had no current plan to do so.

Analysts said quitting the board would give Microsoft the freedom to start selling its shares without risking accusations of insider dealing.

Job cuts

Telewest recently said it was cutting 1,500 jobs as part of efforts to trim costs by �50m ($73m) over the next year.

Most of the job cuts - 14% of the company's total workforce - were to come from network operations. The consumer and business divisions are being merged to streamline the company.

Figures for the first three months of this year suggested Telewest's business was gaining strength, with increases in revenue and a reduction in net losses.

But the company remains weighed down by more than �5bn in debts.

Liberty takeover?

And investors remain unconvinced, calculating that, like rival NTL, Telewest might be forced to restructure its debt by handing over to bondholders a substantial ownership stake in the company.

Telewest shares are slumped near all-time lows, down more than 98% on their tech boom peak.

In Wednesday morning trading, the shares dipped to 8.6p, down from nine pence at Tuesday's close.

This left the UK's second biggest cable firm with a market value of about �270m.

Telewest said Microsoft had on Tuesday informed it of its intention to withdraw Henry Vigil, Salman Ullah and Dennis Durkin from its board with effect from Wednesday.

Analysts said Microsoft's move, while not entirely unexpected, increased the possibility that another major Telewest shareholder - John Malone's Liberty Media - would eventually take over the company.

Another widely reported possibility is a merger with NTL.