DOW JONES NEWSWIRES....6/9/01 7:26 am
6/9/01 7:26 am
WorldGate Commun Up 16% After AT&T Delays Set-Top Box
By Kathy Chu
Of DOW JONES NEWSWIRES
NEW YORK -- AT&T Corp.'s (T) decision to retrench on plans to deliver interactive television via a sophisticated set-top box has at least one indirect beneficiary: WorldGate Communications Inc. (WGAT), whose shares surged 21% Friday.
WorldGate, Trevose, Pa., develops software for Motorola Inc.'s (MOT) DCT-2000, an earlier set-top version that AT&T is installing at a rate of about 3,500 a day. The sophisticated set-top box that AT&T had planned to use was called the DCT-5000.
Analysts say that WorldGate - which provides cable television-based Internet services - has wavered little from its focus on this earlier set-top box, due to the company's belief that the technology provided sufficient features for consumers.
"This validates what the company is doing, and that WorldGate is the only game in town right now," said Janney Montgomery Scott LLC analyst James Meyer.
The decision by the nation's largest cable operator to scale back its commitment to the DCT-5000 - and to focus instead on a midrange set-top box - is a blow to Microsoft Corp. (MSFT), which has invested $5 billion in AT&T to deploy software in set-top boxes.
AT&T is now asking Microsoft and rival Liberate Technologies (LBRT) to develop software for a midrange box with less features than had been planned for the DCT-5000. The latter would have had more memory than the 2000 and a built-in cable modem and also would have given users the ability to watch digital video, talk on the phone and surf the Internet simultaneously.
"The value proposition for the DCT-5000 is not here yet," said PMG Capital analyst Joel Achramowicz. "AT&T needs to recoup its investment in the 2000 before it goes to the 5000."
Liberate's efforts have been focused on developing software for the more advanced box, said Gerard Klauer Mattison & Co. analyst Michael Cristinziano, but the company also has solutions for the 2000 set-top box - which may explain the stock's rise Friday.
"They did the right thing by hedging their bet," he said.
Shares of Liberate Technologies recently traded up $1.02, or 12.8%, to $9 on volume of 3.5 million shares, compared with average daily volume of 520,800 shares.
WorldGate's shares recently rose 93 cents to $5.06 on volume of 1.1 million, compared with average daily volume of 255,100.
Neither company could be immediately reached for comment.
Gerard Kunkel, senior vice president for WorldGate, said the company knew the DCT-2000 set-top box was the right technology for cable, and foresaw that the more advanced box wouldn't be deployed - partly because of software complexity.
The foresight, according to Kunkel, came from Hal Krisbergh, WorldGate's founder and chief executive. Krisbergh previously was president of General Instrument, which rolled out the first DCT-2000 set-top boxes and is now the communications unit of Motorola.
WorldGate's software delivers interactive television at about $5 to $15 per home, while the DCT-5000 could have caused costs to skyrocket, according to Kunkel.
AT&T's shift away from Motorola's more advanced box "changes the landscape" of interactive television, he said, because it prompts newfound respect for the DCT-2000. |
