Motorola debuts set-top computer

Motorola launched its first effort at making a TV set-top computer for cable companies that will provide a variety of multimedia features including Internet access and movie playback, underscoring a strategy that differs significantly from Microsoft's.

According to Motorola, its "Blackbird" set-top box provides a platform for developers to launch products and services with 3D gaming, DVD-based games and movies, in addition to Internet browsing. On paper, this is more than current Internet set-top boxes such as Microsoft's WebTV at a similar cost.

Motorola Blackbird set-top box

Motorola said this is made possible by using a programmable PowerPC processor in conjunction with high-end multimedia processing technology from VM Labs.

It's possible to watch "video from a broadband network, from cable, or from a satellite, or from a DVD disc. If you'd rather play a game, we turn the same [processing] engines into game playing engines, and will outplay the latest, greatest game console," said Jim Reinhart, general manager of Motorola's media processing and platforms division.

Motorola introduced the device at the International Broadcasters' Convention in Amsterdam after a two-year development period and start-up costs ranging into the tens of millions of dollars.

This dovetails with Motorola's cable modem business, which is the technology that enables high-speed Internet access. Motorola is one of the largest suppliers of modems for connecting to the Internet via cable TV lines, but Blackbird marks the company's initial foray into set-top boxes.

The Blackbird design breaks ground due to its flexibility and openness, in contrast to technology by other sector giants Microsoft (which owns WebTV) and Intel, Reinhart claimed. Motorola's device is based on operating system software from Microware and uses Java to send applications to set-tops that have been installed on networks.

"Microsoft does not want hundreds of companies going off and developing proprietary services that don't need Microsoft software," he said, in reference to the company's efforts to use its Windows CE operating system (OS) in cable set-top boxes.

Separately, Microsoft's current offering in retail stores-the Web TV service--requires a $200 set-top box used in conjunction with WebTV's service. The device was designed to allow viewers to surf the Internet over their TV screen, send electronic mail, and shop. Microsoft eventually plans to have the device use Windows CE in upcoming versions.

"WebTV is the leading consumer set-top box, but unfortunately for now and some time to come, they occupy the 'appliance' space. Its an add-on, specific-function box and service," said Cynthia Brumfield, analyst with Paul Kagan Associates. "Motorola is targeting something more fundamental-they want to govern all communication in and out of home with their box."

WebTV differs from Motorola's design in several respects. First, it does not have the ability to offer additional functions through new programs running on the set-top--such as videoconferencing-that Blackbird can, Motorola said.

Second, and maybe most importantly, Motorola's main business for the foreseeable future is selling cable companies and consumer electronics manufacturers circuit boards or completed boxes for other companies to sell under their own brands. WebTV licenses a platform design, but its main business is providing service.

Motorola developed the set-top box to show off the various functions the device can perform, but the systems will initially be deployed by cable system operators, and could appear in different forms, such as a game console or a digital home theater system with DVD player.

"It's an architectural concept that will result in many different derivatives into different networks around the world.Cable companies will go to consumers with functions they understand, like Internet browsing, and [offer] upgrade capabilities beyond that, much like the PC today," said Ray Burgess, vice president of Motorola's Consumer Systems Group.

In that regard, Motorola's main competition will be cable set-top box manufacturers like General Instrument and Scientific-Atlantic, which are also working on digital set-top boxes that enable enhanced cable TV services.

However, Burgess said that Windows CE hasn't been ruled out as an OS, it's just that the product isn't ready yet for use in a set-top box and furthermore, "the OS doesn't really matter" because it sits under the Web browser.

Motorola said it already has orders for the first million units of the multimedia set-top computer and sees huge additional demand.

"Our biggest challenge in 1999 is ramping manufacturing. The demand is there to consume virtually anything we're capable of fielding," said Reinhart.

Although the set-top box business is not likely to have an immediate impact on Motorola's $30 billion in annual revenues, Brown Brothers Harriman analyst Robert Wilkes said jumping into the market is a positive step.

Motorola has been plagued with softening demand in its principal semiconductor, wireless phone, and pager businesses, due in part to the economic crisis in Asia, and is undergoing a restructuring. The company recently reported second quarter operating earnings of $6 million, compared with $392 million last year.

Reuters contributed to this report.