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IBM targets set-tops with new chips

Big Blue says it is developing chips for television set-top boxes that will transform TV sets into interactive, two-way information appliances.

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Computer giant IBM said today it is developing chips for television set-top boxes that will transform TV sets into interactive, two-way information appliances.

By combining PowerPC processors and television set-top box (STB) components into a single "system-on-a-chip," the company aims to improve system performance and lower prices.

"The PowerPC is an ideal chip because it has a good ratio of power consumption, performance and low cost," said Tom Halfhill, embedded processor analyst for MicroDesign Resources. "The thing about the set-top box market is that it is not like the PC market, where you have a dominant chip company and a dominant OS. The variety is much broader."

The new chips, due to be released in May, are further indication that IBM intends to become a serious player in the booming set-top market.

It also heats up the competition among processor designers. Intel, National Semiconductor, Hitachi and touted start-ups like Transmeta are all clawing to land deals to provide chips to set-top box makers, which in turn are competing to land lucrative deals with cable providers and broadcasters.

Each of these chips, the companies say, have advantages over the other. Intel says its processors will be compatible with the broadest range of plug-ins and other software incorporated into today's Web sites. Transmeta says its Crusoe processor is just as flexible as Intel's Celeron but runs on less power. Crusoe, however, is just coming to market.

IBM could present a fairly compelling argument. PowerPC chips have the advantage of generally using little power, and they perform well on benchmark tests. In addition, PowerPC chips are compatible with a substantial number of plug-ins because the chips are used inside Apple PCs.

IBM's entry is another sign that the convergence of digital technology and television, touted for years, appears to finally be ready to take off.

"The passive, one-way TV in your living room is being transformed into a gateway for rich, interactive content," said Paul Belluz, director of digital video products at IBM's Microelectronics Division."

Current devices have somewhat limited functionality, ranging from WebTV devices that allow Web surfing via a TV set to "digital" VCRs such as TiVo and Replay that simplify the process of recording TV programs. But ubiquitous broadband connections, increased storage capacity and other technological improvements are expected to lead to souped-up devices that permit customers to download any movie on demand and access huge entertainment and information libraries with a click of the remote.

IBM's set-top plans fit into its overall technology strategy, revamped last month to focus on a whole host of new markets, including everything from expensive servers, software, PCs, all-in-one models built around LCD displays, new-fangled paper computers, handhelds or wearable PCs.

The effort could also help IBM squeeze more profit from PowerPC. Although Apple has seen its market share rise in recent years, PowerPC has not lived up to the potential backers envisioned when the chip was unveiled last decade. The chip, to some degree, has always been sort of an art-house favorite: loved by critics but lacking box-office appeal.

Over the past few years, IBM has also served as the manufacturing arm for some of Intel's rivals, including National's former Cyrix division and Transmeta.

TV set-top boxes offering interactivity and online services from cable and satellite TV providers are expected to be the first of a new wave of Internet technology hitting the home, in a market analysts say will eventually outpace even consumer PCs.

Overall, the market for information appliances, including set-top boxes, handheld computers and gaming consoles, is set to grow from 11 million units shipped in 1999 to 89 million units in 2004. The market will grow from revenues of $2.4 billion last year to $17.8 billion in 2004, according to research firm International Data Corp.

Customer versions of IBM's STB PowerPC 405 "system-on-a-chip" design--and the companion audio/video/transport decoder--are expected to be available in May, followed by a new PowerPC 401 sometime in the second half of this year.

Reuters contributed to this report.

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