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Motorola to Enter TV Set-Top Box Business, People Say
Schaumburg, Illinois, Aug. 25 (Bloomberg) -- Motorola Inc., the world's largest cable modem maker, will enter the television set-top box business, people familiar with the device said.
The set-top box will allow TV viewers to access hundreds of channels as well as on-demand video, telephone service, Internet access and online commerce.
Motorola, the biggest cellular phone maker, is seeking a new line of business to bolster profits amid plunging sales of its phones and losses in its semiconductor business. The set-top box business has become increasingly important as cable TV systems emerge as a leading portal for high-speed communications access into the U.S.'s 100 million households. The set-top box business is expected to generate more than $5 billion in U.S. sales over the next three to five years.
''Motorola has the facilities to produce these things and they've got the expertise. So it seems obvious they'd be a player in that area,'' said Brian Eisenbarth, an analyst with Collins & Co. ''The could use some growth.''
The company will unveil its set-top box at the International Broadcasters Convention in Amsterdam on Sept. 14, according to industry sources. The box will include Internet software allowing two-way communications, such as e-mail and on-screen programming guides.
The Schaumburg, Illinois-based company has shipped 250,000 cable modems since it entered the business in 1996. The devices use cable TV lines to transmit data 25 times faster than regular analog phone line-connections. The modems can be used with the new box, as well as connecting equipment for cable telephone service.
Consumer Product
Motorola declined to comment on what it will be introducing at the European show, except that it involves ''a revolutionary new consumer product for Motorola,'' said David Rudd, a company spokesman.
Others, however, note Motorola signed a license agreement on June 25 with software maker Spyglass Inc. for Internet browser and micro-server technology that could be used in a set-top boxes.
Spyglass, based in Naperville, Illinois, developed one of the first Internet web browsers, called Mosaic.
''It appears that it's real -- that there is something that is going to happen in terms of an announcement,'' said Philip Sirlin, an analyst with Schroder & Co. Inc.
The new generation of television set-top boxes will host a number of communications services and cable TV companies are upgrading their systems to offer them. The companies want to sell bundled services, including enhanced channel offerings, an alternative to local telephone service, fast Internet connections and electronic shopping.
A number of ideas are being proposed, including the offering of ''chat'' sessions with other program viewers and detailed information about programs with the click of a button.
Dominant Players
Two companies, General Instruments Corp. and Scientific- Atlanta Inc., dominate sales of the boxes and accompanying systems to cable system operators.
''For all practical purposes the country is divided between Scientific-Atlanta and General Instrument systems,'' Sirlin said, explaining that other companies, notably Hewlett-Packard Co. and Sony Corp., decided against getting into the business.
''It's actually a lot more difficult to do then is often appreciated,'' Sirlin said. ''The technology is not trivial.''
Nevertheless, Motorola has pushed ahead with the development of a box that may be sold by retailers. Sources said it is acquiring technology from Spyglass and others to speed its development.
Spyglass officials declined to comment.
Abhishek Gami, a William Blair & Co. analyst, said the company's Internet browser software and its micro-server technology could be used in the boxes.
The browser could be used to weave text with television images while the micro-server could store information and be used in communications between the home and cable or satellite TV companies.
''It fits logically into an end-to-end system of communications between set-top boxes and the head end (of the cable system),'' said Gami, who has a long-term buy rating for Spyglass.
It also fits with Motorola's desire to increase sales. Collins & Co.'s Eisenbarth said the market for set-top boxes could grow dramatically if people keep demanding faster Internet access from their homes.
He said Motorola can use expertise gained in manufacturing cable modems and semiconductors in producing the boxes.
''They definitely spent the capital to be a player in that market. It's just a matter of what the demand will be,'' said Eisenbarth, who rates Motorola shares as a buy.
Motorola shares rose 1 3/8 to 50 5/8. Spyglass rose to 11/16 to 14 11/16.
18:41:27 08/25/1998
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