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Newly named Liberate catches IPO bug

The former Network Computer files to go public to finance its attempts to garner more of the market for TV set-top boxes and other information appliances.

Liberate Technologies, the just renamed Network Computer, yesterday filed to go public to finance its attempts to garner more of the market for TV set-top boxes and other information appliances.

Liberate Technologies is looking to generate up to $100 million from its IPO, based on its registration filing fee with the Securities Exchange Commission. Liberate has yet to file the number of shares it's looking to offer or set a pricing range.

The IPO is being underwritten by Credit Suisse First Boston, Hambrecht & Quist, and Charles Schwab & Company. Liberate Technologies will trade under the symbol "LBRT."

NCI was originally formed to perpetuate Ellison's vision of a stripped-down computer that relies on powerful computer servers to run its data and software programs.

While NCI spent a significant amount of money trying to unseat the PC and Microsoft's dominance of the computer software market, the company had to refocus on a developing market. Liberate has not had a profitable quarter since its inception in 1996, although it has recently scored some wins with AOL, US West, and others.

In its SEC filing, Liberate revealed that it has lost $138.6 million since its founding in 1996, which includes a write-off of $58.1 million of acquired in-process research and development related to the acquisition of Navio in May of 1997. Navio was an affiliate of the former Netscape that was developing Web browser technology for information appliances.

Liberate said that revenues for the quarter ending February 28, 1999 were $4.5 million, compared with $4.4 million for the previous quarter. Losses from operations were $8.3 million for the quarter, compared with $7.7 million in the previous quarter.

Liberate's filing noted that its losses are likely to continue for the "foreseeable future" as it continues to invest in research and development activities related to making its products available on new devices.

"Competition in the information appliance software market is intense. We expect competition to persist and intensify as the information appliance market develops and competitors focus on additional product and service offerings," the company stated in its filing.

Another caveat Liberate offered up: So far, most of the company's revenues have come from services it provides to customers such as engineering, and not from licensing and royalty payments, which only hits the books once companies start shipping products with the company's software. "If we are unable to derive a greater proportion of our revenues from these license and royalty fees, our losses will likely continue indefinitely."

Recently, deals include the use Liberate's software in set-top boxes that will bring America Online to the television set. The company is also supplying software for use by US West to provide interactive TV and telephony services and has secured a number of deals abroad.

In conjunction with the name change, Liberate noted that a number of U.S. cable companies are investing in Liberate, which could be a sign that those companies are getting ready to sign deals to use the company's software. If they do, the company could emerge as a viable competitor to Microsoft, which badly wants to ensure that its software will find a home in information appliances.

Filing reveals GI, Sun deals
The filing also offered some insights into other alliances the company has formed to further product development.

General Instrument, the largest provider of cable TV set-top boxes in the U.S., invested in Liberate and will work with the company to integrate its software offerings on set-tops. Liberate, in return, said it is paying GI $10 million over a three-year period "for development services" to be performed by GI. This is significant because GI is supplying a large portion of the advanced digital set-tops that cable operators will use to provide interactive services, including the boxes that AT&T will use.

Liberate noted in its filing that it has transferred its "NC Navigator" and "NC Administration Server" technology to Sun Microsystems, which were Liberate's primary offerings for the corporate network computer market. Liberate said it has maintained rights to this technology, saying it will still be the basis for future products.

Additionally, Sun will co-develop TV set-top box technology with Liberate, which it will then distribute based on a non-exclusive license.