For Microsoft, It's "Inactive TV"
Business Week
Missed deadlines have cost it a chunk of the set-top biz
Apparently, you can't buy friends the way you used to. Consider Microsoft Corp. In the past three years, the Redmond (Wash.)-based software giant has dipped into its multibillion dollar cash hoard and invested over $10 billion in cable companies around the world. The conventional wisdom: Microsoft was buying market share for its fledgling interactive TV software.
That's logical. But because Microsoft has failed to deliver a reliable system on schedule, things haven't worked out that way. Instead, cable companies are considering--and even signing up with--rivals. The most recent threat of defection came from Netherlands-based United Pan-Europe Communications, Europe's largest cable operator, with 8.4 million subscribers. UPC is now considering going with Liberate Technologies.
''LONG LIST.'' Months earlier, Telewest Communications, Britain's No. 2 cable operator, also chose to go with Liberate. And that happened even as Microsoft was in the midst of closing a $2.6 billion deal to buy a 24% stake in Telewest from MediaOne. ''It's full speed ahead, but not necessarily with Microsoft,'' warns Josh Bernoff, an analyst with Forrester Research Inc. in Cambridge, Mass. Probably the most disturbing development from Microsoft's point of view: Even AT&T--its largest cable investment--may be looking at a rival system as well, sources claim. AT&T declined to comment.
The problem is clearly one that Microsoft brought on itself. It stems largely from Microsoft's insistence on powering the boxes with its Window CE operating system--the little sister to the Windows PC software. The benefits of using Windows CE are significant, since it can snap easily into other Windows-run systems and because a large software-development community writes applications for the operating system. But while Liberate's system was developed from the ground up for set-top boxes, Windows CE, used in everything from handheld computers to digital gas pumps, is more complex. ''There's just a big, long list of things to do,'' says Microsoft Senior Vice-President Jon DeVaan.
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The interactive TV game is still very young, and Microsoft is far from out of it, particularly given its heft. ''They have tremendous financial resources that they can throw at the issue,'' says Francois Carayol, CEO of Canal+ Technologies, which makes its own TV software. But as Microsoft is learning, money is not always enough.
By Jay Greene in Seattle, with Ronald Grover in Los Angeles and John Rossant in Paris
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