First time I've seen Sharon Stone and VxWorks mentioned in the same article <g> ...
Forbes interview with Mitchell E. Kertzman, LBRT CEO
forbes.com
By Charles Dubow
The Western Cable Show held last week in Los Angeles is one of the biggest annual events in the cable industry. It is a place where all the major players, and many minor ones as well, convene to make announcements, slap backs and work deals. The show has traditionally been dominated by major cable operators like Cox (nyse: COX) and Cablevision (nyse: CVC), but 1999 has been a period of enormous change in the industry and many new companies have emerged as forces to be reckoned with. One of the new faces is Mitchell E. Kertzman, the president and chief executive officer of Liberate Technologies (nasdaq: LBRT).
"We had a great year and the show's gone very well for us," said Kertzman in an interview last week. "We even had Sharon Stone crash our party the other night. When that happens, you know you're hot."
Liberate makes Internet access software for set-top boxes, smart phones, and other next-generation appliances. Since the company went public in July, Liberate has been going gangbusters. The company's stock has been one of the most explosive in this year of stand-out maiden performers, climbing more than twelvefold since its debut to just more than $240 at the close of trading Dec. 22. It also has racked up an impressive number of customers and clients such as Cox, Cable & Wireless (nyse: CWZ), News Corp.'s (nyse: NWS) Star TV satellite operation and interactive TV company Wink (nasdaq: WINK).
The Western Show saw an unprecedented flurry of announcements from Liberate, including deals with the set-top box giant General Instrument Corporation (nyse: GIC), Excite@Home (nasdaq: ATHM) and video-on-demand (VOD) company SeaChange (nasdaq: SEAC). Liberate also has inked a deal with Sony's Columbia TriStar Television Group to create interactive versions of game shows "Wheel of Fortune" and "Jeopardy."
On the strength of these announcements, combined with not a little end of the millennium market exuberance, Liberate has seen its share price soar nearly 52 points this week.
Forbes.com spoke with Kertzman during the Western Show and he described, with his characteristic wry sense of humor, the reasons behind his company's new deals, what's wrong with Microsoft's set-top software and Y2K.
Forbes.com: This has been a busy week for Liberate. Let's talk about the GI deal first.
Kertzman: This is the latest step in a long-standing relationship with GI and solidifies our co-leadership position with Microsoft (nasdaq: MSFT) on the GI platform. Both of us are the primary solutions on their high-end box, the DCT5000. It will be a broad relationship, encompassing both R&D and marketing and I think it's a great thing. The reason why GI also feels this way is because their customers--the cable companies--feel this way about us. The set-top box manufacturer is not our main customer. In a sense they're our partner in helping the end customer, which is the cable company.
Will you be in all the GI boxes?
We'll just be in the boxes the multiple system operators (MSOs) want. The way software works in this market is that the box doesn't actually ship with our software in it. It gets downloaded from the network so it depends on what's installed in the headend in terms of what software gets loaded.
What kind of penetration rate are you looking for with GI?
One hundred percent. That's the only metric we care about.
How realistic do you think that goal is?
Well, given that Microsoft has the AT&T (nyse: T) deal on the DCT5000, my guess is that this will keep us from getting to absolute perfection, but we hope to get a very large share of the rest of the market. But we still hope to do some business with AT&T, so we'll see.
Couldn't Liberate still work with AT&T?
It would be possible to have our software run on the Windows CE operating systems. No one's asked us for that yet, but we could do it quite quickly and easily. You see, since our software is not an operating system it runs above the operating system on things like Wind River VX Works. In the DCT5000 they have their own OS called Vertex; [rival set-top box maker] Scientific-Atlanta (nyse: SFA) has PowerTV. Windows CE is just another operating system. But now Microsoft's software that competes with ours was until recently called TVPack, and this week they gave it the scary name of "Microsoft TV." Think about that. If you're a consumer, do you want to buy something called Microsoft TV?
Not if it crashes all the time.
Exactly! There's a good example of a bad brand extension.
But Liberate could work with Windows CE. What advantage would AT&T, for example, have in choosing to run Liberate's software on Microsoft's operating system?
Well, for example, it means they would get software that works. We're shipping our software today and Microsoft is way late with theirs. They'd also get software that would be less expensive to them. Although I don't know the specifics of AT&T's deal with Microsoft, I know what our competitive pricing is in the market. So I think they'd get a better solution for lower cost.
Liberate also announced a deal with Excite@Home this week. Let's talk about that.
Excite@Home is in two businesses. They're in the cable modem business and the content business. So one of the things we're doing is that we've been working to provide Excite@Home TV-oriented content on the Liberate platform. I think it's a great opportunity for the companies to work together and we have many common customers as well, such as Cox. We've also been working with them for years. It's a long-standing relationship. Unlike many things at Western Cable, this wasn't born of a press release.
It's also a good way for Excite@Home to protect itself against the concern that its majority owner, AT&T, may not renew its exclusive contracts when it runs out in a few years. It could also give Liberate a backdoor into AT&T if things went well.
I can't really comment on the internal politics of AT&T.
All right. Is there a pattern to the announcements that Liberate made this week?
Let me put all the announcements we made this week into context for you. They all fall under the umbrella of what we call PopTV, which is our general partner program. We've formalized the program for enlisting content partners and technology partners of all kinds to support the Liberate platform. What makes the platform so successful is a lot of content applications and technology. So, for example, the announcement with "Wheel" and "Jeopardy" is a content relationship, as is the deal with Excite. The announcement with Macromedia (nasdaq: MACR) is a technology relationship for supporting their standards for the Web on television. SeaChange is sort of a technology relationship, integrating our platform with video-on-demand.
We think cable companies eventually will want to do everything through a single user interface: interactivity, electronic programming guide, video-on-demand. Since the Liberate platform effectively presents the user interface that consumers see and we present such a rich set of tools for that, SeaChange, as well as other VOD companies such as Ncube and Diva, will also look to be on the Liberate platform
What hopes do you have for 2000?
In the new millennium we're hoping the lights work and the planes fly.
But you're Y2K-compliant so it's no problem for you, right?
Right. We expect calendar 2000 to be a big year for us. See more design wins, more network operators signing up with us and you'll see more deployments. In a sense, 1999 was a year in which we proved we had a significant place at the table of the North American cable industry and that 2000 will be the year in which we actually start delivering on that.
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