NCI gains IPO steam with AOL deal
Long adrift for lack of a successful business strategy, the company is on a roll as it prepares for an IPO that could prove pivotal.
NCI, which has been IPO bound for some time, several weeks ago signed a deal with America Online to provide the online giant with technology for a set-top box, sources told CNET News.com.
AOL will use the technology to expand its services to television users through the launch of AOL TV. Last spring, AOL took the first step toward developing its television service when it acquired NetChannel, which will help create AOL-branded interactive content for television.
Tricia Primrose, an AOL spokeswoman, said the company does not comment on rumors or speculation about deals it may be forging. Randy Brasche, an NCI spokesman, also would not comment on whether it is teaming with AOL.
If an agreement between the two companies does come to pass, NCI will have struck its first high-profile domestic deal, building on a spate of sizable foreign deals it has struck in the past. Earlier this month, for example, NCI announced that it would provide set-top software to Belgium's telephone company, which will use it for its CyberTV service. Last June, NCI sold its software to four Japanese telecommunications companies that plan to offer Internet access to their customers through TV sets. Terms of these deals, however, were not disclosed.
Indeed, NCI, which competes with Microsoft's WebTV and a host of other software vendors, is gaining momentum as it heads toward a public offering, even though one source maintained that NCI's priority is getting its products out the door and ramping up the deployment of its technology.
Another source, however, said a deal with AOL would push NCI's pending offering to the fore.
"If you look at interactive services, AOL is clearly the leader. This deal is really significant for [NCI's IPO plans]," the source said. "Without this deal, it would take a lot of independent ISPs to match the same audience as AOL."
NCI also could be positioning itself as an acquisition target, though one source said NCI's goal is to remain independent.
During the past year, AOL had been eyeing potential partners for its television strategy ranging from small companies that could provide only a single piece of the technology it required to larger players, like NCI, that could provide it with a wider breadth of advantages.
"NCI was not selected just for its technology," said one source. "It was selected for several reasons, like its business, technology, and relationships."
America Online has yet to select a set-top box manufacturer for AOL TV, but one advantage that NCI can offer AOL no matter which manufacturer it ultimately chooses is customization. Original equipment manufacturers can choose from among NCI's technology specifications those that allow it to manufacture its set-top box at a desired price. For example, an OEM may opt for a more expensive cable modem that would drive up the price of the box, or a cheaper dial-up modem that would keep prices low at the expense of access speed.
"The advantage of NCI is its software interface?AOL will develop the application once and it can run on more than one OEM device, as long as they use NCI's design," a source said.
Sources said that AOL originally had wanted to roll out its TV service by Christmas 1998 but that a Christmas 1999 launch still is feasible.