NCI checks for pulse

Mitchell Kertzman, former chairman of database maker Sybase, is entering the consumer TV set-top box space as chief executive and president of Network Computer Inc.

Kertzman replaces David Roux, who will remain NCI chairman. Roux, who is also executive vice president of development for Oracle, has served as CEO since February in an interim basis. Roux succeded Jerry Baker, a 14-year Oracle veteran.

Kertzman faces a formidible task: to jump start a company that has barely penetrated its market, lost some key deals, faces intense competition from Microsoft--and now has its third chief executive since its founding less than three years ago. Last year's merger with Netscape's Navio, which makes browsers for Internet appliances and other devices, hasn't yet done much to boost the company.

Kertzman is bullish, however. NCI has a "ton of big customers" and has strong sales momentum, he said.

Although Kertzman, 49, brings keen marketing skills to the table--and may position NCI for an initial public offering--his success at turning Sybase around fell short of many analysts' expectations.

"NCI has almost become irrelevant in the [network computing] terminal field. NCD and IBM are strong in this market and NCI is dead," said Rob Enderle, an analyst with Giga Information Group. "Now they're providing technology to set-top boxes, and I haven't seen a strong performance in the back-end where they're doing large deployments."

NCI spokesman Randy Brasche counters that the company has indeed struck some major deals. He pointed to the 200,000 devices worldwide which now use NCI technology for network computing terminals, embedded devices and set-top.

NCI also is integrating its software for use in British cable provider Cable and Wireless' set-top boxes and main office equipment, Brasche said. Calling the pact a "watershed" deal, NCI plans to begin deployment of the new software this spring.

NCI devices also can be found in Fujitsu's palm-sized computer, Brasche said, as well as in a NEC television set with Internet capabilities.

"I don't see us as struggling anymore. We have a lot of deals," Brasche said.

Last quarter, NCI's revenues rose 104 percent from a year ago, Roux said. He added NCI has generated positive cash flow since the start of the year.

Still, NCI has also lost some high-profile deals.

Last May, in a last-minute offer, competitor Microsoft snagged a 20-percent stake in high-speed Internet access provider Road Runner for $400 million. That deal happened as NCI's controlling owner Oracle and chip giant Intel had also submitted a bid.

"They definitely have standing within set-top software space. The issue is securing that first U.S. operator deal," said Cynthia Brumfield, a cable industry analyst with Paul Kagan Associates. "The Road Runner situation is a classic example. They came within an inch of being an investor. Unfortunately, they just couldn't pull it off. Money spoke."

The deal with Road Runner would have secured NCI a foot in the door with cable operators, who are spending billions of dollars to provide television and Net access to consumers from a single set-top box.

"I think that they have a tremendous amount going for them" in the cable industry, said Jack Miller, business director for digital subscriber networks at Scientific-Atlanta. SA has been working with NCI to port software to its Explorer 2000 set-top box, although the company already has applications and an operating system of its own available for cable companies.

Everybody is always aware of Microsoft's financial backbone, Miller said, but each deal with cable operators is different, and "[NCI] is clearly in the game for all major cable players," he asserted, based on what he has heard from the companies that buy SA's set-top boxes.

Enderle added that NCI must compete against Sun Microsystems, not just Microsoft, in supplying technology for the set-top boxes.

"I'm not convinced they are strong enough to hold onto [suppliers] they have captured so far," Enderle said. "Microsoft can sweeten the pot by helping to pay the costs to deploy the boxes, and NCI is not in that position."

Outside of the finances, Enderle said NCI needs a turn-around CEO. Drew Brosseau, an analyst with SG Cowen, said Kertzman is a marketer who can get his troops rallied to achieve his goals. But Brosseau argued that Kertzman is less of a technologist or turn-around artist.

"I think my skills are directly related to what we want to accomplish," Kertzman said. "I have a pretty strong technical background. In the early part of my career, I was a program analyst and I wrote a complete windowing system for dumb terminals."

NCI selected Kertzman as its CEO because he had accomplished a number of steps throughout his career that were important to NCI at this stage of its development, Roux said.

Roux pointed to Powersoft, an enterprise application development and design tools company that Kertzman founded. "He demonstrated leadership skills in an exploding market and he did one of the most successful IPOs when he took Powersoft pubic," Roux said.

Roux downplayed the need to go public. "An IPO is possible in 1999, but the good news is we don't need to do an IPO," he said. "We have friends and partners to work with us. On the other had, an IPO is attractive to employees, investors and shareholders. We have the luxury of doing it when the time is right."

The NC originally was positioned as a replacement for hard-to-maintain corporate desktop PCs and terminal computers, and NCI was formed to push the idea to corporate customers. Increasingly, though, the Oracle affiliate has been refocusing on the market for "information appliances," because corporations have been unwilling to throw out their investments in current PC software.

"The dismal turnout for network computing was my mistake," Oracle CEO Larry Ellison said at a recent industry trade show. "It was a huge marketing gaffe on my part for calling it [network computing]. Everyone though it was a proprietary system."

(Kertzman is a director of CNET: The Computer Network, publisher of News.com).