Microsoft to unveil a chip for Net, TV
Company tries to move beyond software for PCs
BY KRISTI HEIM
Mercury News Seattle Bureau
SEATTLE -- Software giant Microsoft Corp. and its subsidiary, Mountain View-based WebTV Networks, have been quietly developing a sophisticated communications chip, a sliver of silicon that holds a key to Microsoft's future in the Internet age.
The chip, set to make its debut this fall, will control the forthcoming version of WebTV's interactive television service. But the chip can also be used to power other next-generation devices and services over the Web. Microsoft sees the Internet-linked TV service as only the beginning of a new wave of services and software it hopes to deliver to consumers over the Web in coming years.
Microsoft's development of the Solo2 chip stands in contrast to the longstanding arrangement in the personal computer business, in which Intel Corp. has dominated the chip market while Microsoft stuck to providing software for personal computers. The two companies are expected to continue their partnership in the PC market.
Analysts say that the involvement of the world's biggest software maker in the chip business will help ensure its future.
As Microsoft looks to reinvent itself for the Internet age, it is trying to move beyond providing packaged software for personal computers. In its recently announced ``.Net'' strategy, Microsoft outlined plans to provide services over the Web, such as software by subscription and technology for Internet-linked home appliances. Its forthcoming Solo2 chip that operates Internet devices is vital to those future initiatives.
``The chip is targeted for TV applications, but it could be used anywhere you want to integrate graphics and video,'' said Jon DeVaan, Microsoft's senior vice president for the TV service and platform division.
``It's an engine for the next generation of services,'' said Richard Doherty, director of the Envisioneering Group, a technology and market consulting firm.
He estimates that Microsoft has spent more than $100 million developing the technology, mainly because a chip with such specific, integrated applications wasn't available from existing chip makers, which have focused on the personal computer.
``I think even IBM, Motorola and Intel couldn't have imagined making chips like this five years ago.,'' said Doherty.
The Solo2 chip -- named after Solo, WebTV founder Steve Perlman's dog -- will be unveiled this fall in WebTV's set-top boxes for its new Ultimate TV service. The chip lets viewers surf the Web on a television set and watch or record two different programs simultaneously.
A team of 50 WebTV engineers is designing the chips, which are being manufactured by Toshiba in Japan.
Microsoft acquired the initial technology through its 1997 acquisition of WebTV, a start-up born in a Palo Alto BMW garage two years earlier. The latest chip is a culmination of five years of development work.
After searching early on for products they could buy that would help link the television with the Internet, WebTV's founders concluded that to keep the cost down, they would have to build their own.
``If there were a chip out there that met all of our requirements, it would be a no-brainer,'' said Larry Yang, director of semiconductor technology at WebTV. ``But this area is brand new.''
The off-the-shelf product that comes closest to what WebTV needed costs about $20 apiece to make, he said, while WebTV's own chip will costs less than $10 to manufacture.
WebTV set-top boxes sell for $200 each, and its subscription service, at $24 a month, has about 1.1 million subscribers.
The new Ultimate TV service comes at a time when the market for interactive TV is on the brink of a shake-up.
America Online is set to introduce AOL TV later this year.
The challenge will be convincing consumers about the benefits of interactive television and other Internet-linked appliances. ``Most consumers don't know what home networking is,'' Doherty said.
So far, the market for Internet television services is only lukewarm, said Ian Olgeirson, an analyst with Paul Kagan Associates.
``We think interactive TV will be big,'' he said, but the type of services offered by WebTV ``have been only mildly received to date. AOL TV may be more successful, throwing off our projections a bit, but we still aren't hugely bullish on the services.''
Microsoft's WebTV has an important advantage in being early to the market, Doherty says. ``It's a proven system. That puts them in first place.''
Next year, WebTV will license part of its chip technology to other semiconductor companies to promote the technology and lower costs across the interactive TV industry, said DeVaan of Microsoft.
``(In) running a business, you care about your share of market segment but you also care about the total size of market,'' added DeVaan. ``If there is less money spent to acquire a customer, that's the rising tide that lifts all boats.''
The WebTV team is also working on a more advanced chip that holds 9 million transistors -- roughly equivalent to Intel's Pentium 3 chip. The Solo2 has 2.2 million transistors.
While Intel has been the world's leading chip maker for PCs, and will maintain its partnership with Microsoft for that market, it has been slow to develop chips for new Internet products.
Chuck Mulloy, an Intel spokesman, said the interactive television market is not an important one for the company, which doesn't focus on chips with specific applications.
Recognizing the changing market, Intel today will introduce a new version of its StrongArm chip, a low-power processor for the larger market in mobile devices.
Analysts noted that Microsoft's involvement in chips marks something of a departure from the so-called Wintel alliance in which Microsoft's Windows operating system coupled with Intel's microprocessors have ruled the PC world.
``It's a little ironic with the whole Wintel plan,'' said Linley Gwennap, principal analyst at the Linley Group, a technology analyst firm specializing in the microprocessor industry. ``It was Intel's job to build chips and Microsoft's to build software.
``Intel has focused on the PC, and they're behind in that sense.'' |
