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WebTV adding Windows CE

The new boxes are the first new hardware offerings from the company in almost a year and the first based on Microsoft's Windows CE.

WebTV Networks next week will unveil its next-generation WebTV Classic and Plus television set-top boxes, sources close to the company say.

The new boxes are significant because they are the first new hardware offerings from the company in almost a year and the first based on Microsoft's Windows CE platform, a goal the two companies have been working toward since WebTV's acquisition by Microsoft in 1997.

These boxes will also run on faster processors and offer support for more recent standard Internet technologies.

WebTV set-top boxes are designed to provide inexperienced users with a simple way to access the Internet through the television. Manufactured by Sony and Philips, the current Plus and Classic versions retail for $199 and $99, respectively. WebTV currently counts about 800,000 subscribers, adding new users at a rate of 20,000 per month.

The new versions of these products will have identical price points, sources say, and offer similar features, including Web-enhanced TV viewing, email, and local TV listings.

The new Plus and Classic devices, which connect to the Internet at speeds of 56-kbps, will soon be joined by the $499 WebTV Plus for Satellite, which is designed to work with a complementary service from EchoStar. The EchoStar boxes are expected to be available this month.

The next-generation WebTV Plus and WebTV Classic will be based on a new 175-MHz MIPS processor from Quantum Effect Design, an upgrade from the 112 and 167 MHz processors of existing Classic and Plus boxes. The 64-bit microprocessor is optimized for the Windows CE platform, sources say.

These new WebTV boxes, although not groundbreaking in terms of technology advances, do reflect the influence of Microsoft. WebTV is repositioning itself as a services company, analysts say, and moving away from its origins in hardware design.

The strategy shift may be affected by the management changes hitting the company next month; president Steve Perlman will leave the company he founded. Co-founder Bruce Leak will take over as president.

WebTV declined to comment on the upcoming announcement.

"I think they're going towards a different sort of business model," said Greg Blatnick, an analyst with Zona Research. "They're now much more of a service provider. The box is kind of a minor element of the overall WebTV strategy."

Because of the shift to Windows CE and other standard architectures, the next-generation boxes offer more flexibility for customization by potential partners and customers, according to Blatnick. "You normally want to develop based on something that is popular and widely understood," he said. "The move to Windows CE implies to me that there will be a move toward supporting development around it."

"Anything that they do with the architecture and the software will be flexible and will change over time," he said. "I think it will be designed to expand in terms of functionality."