NCI: Still tilting at Windows?

Network Computers Inc is no more. The Redwood Shores, California-based company long ago gave up on its quixotic attempt to beat Microsoft in the PC industry by selling cheap, fast network computers. Instead it has became a software company for set top boxes. To underscore this change, the company nnounced that it was renaming itself Liberate. But there's one thing a name change won't fix: it still needs to fight its way past Microsoft.

Network Computers Inc is no more. The Redwood Shores, California-based company long ago gave up on its quixotic attempt to beat Microsoft in the PC industry by selling cheap, fast network computers. Instead it has became a software company for set top boxes. To underscore this change, the company announced that it was renaming itself Liberate. But there's one thing a name change won't fix: it still needs to fight its way past Microsoft.

But more has changed than just the name at NCI, er, Liberate. The new company is joining the Internet party, and has secured US$50 million in new financing from a bevy of investors including Comcast, , Hambrecht & Quist, Lucent, MediaOne, and Sun. Kurtzman is signaling that he is set to take the company public, and a name change is just the thing to help investors distinguish the company from its past, which is one of the most public fizzles in tech industry history.

When Mitchell Kurtzman, formerly CEO of Sybase, took over NCI last November, he set about energizing the company for a head on attack to compete with Windows in winning the set top box market. When he came aboard, NCI had not been able to win any significant contracts within the US, although it had serious wins in Japan and England. Now the company counts US West and, most importantly, AOL, among its supporters. "I don't feel like Microsoft will dominate the category; I think cable operators are more savvy than PC OEMs were in the 1980s, when Microsoft was allowed to dominate the PC category."

The company's moment looked to have arrived in 1997 when Oracle, NCI's parent company, tried to buy Digital Equipment. But, the network computer just never caught on. Had NCI come up with convincing technology, and had Digital's worldwide distribution and Oracle's sales force been able to sell the NC to the world, the technology may have had a chance. But that time came and went.

Instead, the company was crippled by conflict- troubled by an unworkable business case built upon a social agenda promoting cheap, ubiquitous PCs for the masses. Then Oracle tried to import its browser technology to NCI, but the effort was rife with strife and aborted.

So under the direction of CEO Dave Roux, an Oracle exec, NCI quietly transformed itself from a company associated with thin client hardware to a software only company. The company now has more than 200 employees, 70 percent of whom are engineers. It claims a 100 percent growth rate. "I think the good news is we've been able to win contracts on the fundamental strengths of the technology," says Kurtzman. "We have not had to buy our business like Microsoft has, we're content to win on merit."

NCI is benefited by a number of big name supporters, especially AOL, which owns a stake in the company. But it also has a big challenge in trying to keep those partners happy. Sun Microsystems, the creator of Java is a backer, meaning for Liberate will be expected to make good use of Java in its set top boxes. So far, set top box makers have been unable to use Java effectively because it is simply too big to use in a small device, like a cable box. "Smaller implementations of Java, personal Java, and Jini are all part of our plans," says Kurtzman. "I think Moore's Law will take effect- we'll see set top boxes that can handle it."

Kurtzman has faith that Sun will make Jave easier to use. "Sun is getting better, they are working with standards bodies. With technology, what you have to do is aim ahead of today's platforms, you have to make assumptions about where it will go." He also says that Java brings portability and programmability to the set top box. "That just doesn't exist in proprietary technologies like Windows. Our competitive advantage is our commitment to open standards like HTML."

The company is expected to go public soon, but even with an infusion of cash from a public offering, Liberate will probably never be able to through around billions of dollars to woo cable operators, as Microsoft has done with AT&T. But Kurtzman is still optimistic. "I think we've got a better business model, that people trust- basically, we're not trying to take over people's business."

According to Kurtzman, the big move to set top boxes will come when people make the move to digital television, which is slow to emerge. "Digital TV is happening today," he says. "We're already on analog boxes, but digital will be a powerful force. Some of the growth will happen when traditional makers like Sony get behind it."

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