Oracle reboots network computer
San Francisco Business Times - by Lorna Fernandes Business Times Staff Writer
Attempting to breathe life into its moribund network computer efforts, an Oracle Corp. arm is shifting its focus to using television sets and other appliances as gateways to the Internet.
Network Computer Inc., which Oracle co-owns with Netscape Communications Corp., is moving away from developing software exclusively for network computers, to software that will link traditional appliances like televisions, cable set-top boxes and game consoles to the Internet.
"We are devoting the majority of our resources to the enhanced television market," said David Roux, chief executive of NCI. "More than 50 percent of our staff will be working on bringing the Internet experience to television."
The company, which started with about 60 employees in 1996 and grew to more than 100 after it merged with Netscape's Navio Communications division, is now up to 200 workers.
While NCI has shifted its strategy, its new direction keeps it going head-to-head with PC giant -- and Oracle nemesis -- Microsoft Corp. The Redmond, Wash.-based computer giant in 1997 purchased Palo Alto-based Web-TV, a company with a similar service that delivers customized Internet services via TV screens.
Web-TV has an edge on the market, but NCI is a viable competitor, said David Card, analyst with Jupiter Communication in New York.
"Their new focus is good," Card said, "and aside from Web-TV, they are the only game in town."
Oracle CEO Larry Ellison and Microsoft CEO Bill Gates have carried on a long-running feud, and Microsoft has been in Oracle's sights since it formed NCI in May 1996 with hopes of putting a big dent in the PC market. The "NC", designed as low-tech, low-priced computer terminals driven by software that resides on the Internet or corporate server, was heavily touted by Ellison as a cheaper alternative to high-priced PCs.
"It is clearly part of our strategy to dethrone Micro-soft," Ellison said in an April 1996 interview on PBS's Charlie Rose Show. "But the way to dethrone Microsoft is not simply to throw darts at Bill Gates. You have to think about products and create products that are better than products that Microsoft is selling. (Microsoft's) vulnerability is the incredible cost to corporations of PCs and the incredible complexity to consumers of these PCs."
The goal was to make NCs cheaper and more user-friendly. Since software would be downloaded from the Internet or kept on a server, users wouldn't have to go to the expense of purchasing memory or software up-grades for their terminal.
But falling PC prices and technical obstacles have kept the NC from blossoming into the mass-market appliance of Oracle's dreams.
Greg Blatnik, an analyst with Zona Research Inc. of Redwood City, called Oracle's NC efforts "a dismal failure," including a 1996 venture with RCA to produce TV set-top boxes for the consumer market.
RCA sold but later recalled about 10,000 of its NCI set-top boxes -- and is ironically now working with Microsoft's Web-TV, Blatnik said.
(An Oracle spokesman said the RCA boxes were recalled because America Online acquired the service provider and canceled the contract).
"They've had no pattern of success, but a continuous stream of announcements that have failed to pan out," Blatnik said.
NCI now downplays its earlier hopes for the network computer but analysts say the small market has clearly been a disappointment for Oracle.
Network Computer, which merged with Navio in 1997, now provides Navio browsers to IBM Corp.'s NC division.
IBM's NC market is small but growing as increasing Java applications become available for NCs, said Paul Boulay, IBM spokesman for the NC division.
IBM had 1,500 clients in 1997, which doubled this year. It shipped about 10,000 units last year and expects to ship 100,000 this year, Boulay said.
A recent report by International Data Corp. estimated the PC market is growing 12 percent by 2002, compared with 96 percent growth in Internet access appliances. The study predicts almost 56 million personal computers will be sold in 2002 compared to 36 million this year. But it also forecasts sales of 42 million Internet appliances -- a market that barely exists today.
"(NCI) has seen the home computing market as the volume opportunity," said Peter Lowber, research director for the Data-Pro/Gartner Group in Boston. "The NC market is a limited market in terms of volume compared to home devices."
NCI officials agree.
"PCs are important," said David Limp, company vice president of marketing, "but we can't envision a day when there will be three PCs in every home. On the other hand, many homes have three TVs, a couple of VCRs and a game console."
The strategy is to provide NCI software to link everyday appliances to the Internet. For instance, instead of tuning into the TV programming channel and waiting until it scrolls to the appropriate channel, the linked software will allow users to enter the name of the show they desire and have the information instantly appear on their screen.
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