Expanding its new thin-client strategy, Microsoft Corp. cut
a deal with NDS Group plc last week to license the company's middleware solution in
order to deliver the "Microsoft TV" platform to homes with low-end digital
set-tops.
The agreement came the week after Microsoft acquired Peach
Networks Ltd, an interactive-television vendor that targets cable operators that have
deployed basic digital set-tops.
"We expect [the Microsoft-NDS] solution to be a major
step forward in the evolution of enhanced television," said Phil Goldman, general
manager of Microsoft's TV Platform Group.
Microsoft plans to license the NDS middleware and to offer
the NDS solution to cable operators that agree to deploy the Microsoft operating platform.
The company will share the license fees with NDS.
But the deal doesn't guarantee NDS that cable
operators deploying the Microsoft platform will choose the NDS middleware product. While
the two companies will jointly market the NDS platform, MSOs can choose vendors other than
NDS to work with the Microsoft platform, Goldman said.
"NDS does not believe that we ever get any business
automatically. We have to work hard to get every piece of business," NDS CEO Abe
Peled said.
The companies said top Brazilian MSO Globo Cabo S.A. is the
first operator that has agreed to deploy the Microsoft-NDS solution for its digital
launch.
Goldman said he expects that U.S. operators deploying a
combination of basic and advanced digital set-tops "are likely to see a need for that
solution." But some analysts expect the biggest market for the thin-client products
to be overseas.
"It is possible that cable operators in North America
will at some point decide to install this product in lower-power set-top boxes that they
deploy. However, the largest potential market for this product appears to be
internationally, where operators may go with a less expensive set-top box," Morgan
Stanley Dean Witter & Co. analyst Gary Lieberman wrote in a report on NDS last week.
NDS currently doesn't support any of the low-end
digital set-tops deployed in the United States, including the 6 million-plus Motorola
Broadband Communications Sector "DCT-1200" and "DCT-2000" set-tops
that have been shipped.
Peled said the company supports basic digital set-tops from
Phillips Consumer Electronics Co., Zenith Electronics Corp., Pace Micro Technology plc,
Legend Holdings Ltd. and Samsung Telecommunications America Inc.
In October, Cablevision Systems Corp. announced that it
would deploy the NDS "Open VideoGuard" conditional-access solution for its
digital launch on Sony Corp. digital set-tops.
While the current agreement only ties NDS with the
Microsoft TV Platform, Microsoft said NDS could become involved in other parts of the
company's business, including its WebTV Networks unit. "I wouldn't rule out
anything as we move forward," Goldman said.
Shares in NDS, which gained 25 percent in February, surged
an additional 20 percent on the news of the deal. NDS closed at $102 per share last
Tuesday -- the day the agreement was announced -- dropping slightly to $99.75 last
Wednesday.
