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IS MICROUNITY'S INTEL END RUN GOING NOWHERE?

Its challenge looks mighty shaky

Ever since chip-industry insiders got wind of what John Moussouris was up to, they have said he was crazy. Little wonder: The founder of MicroUnity Systems Engineering Inc. wanted to make an end run around mighty Intel Corp. with a new chip that promised 100 times the speed of Intel's Pentium at just one-tenth the price. With some $130 million in backing from Microsoft, Tele-Communications, Time Warner, Motorola, and other giants, Moussouris predicted his ``mediaprocessors'' might spawn a generation of multimedia gear to rival PCs.

These days, 8-year-old MicroUnity is looking shaky. Burning through almost $4 million a month and unable to raise additional money, it has been forced to close down its $60 million manufacturing plant and lay off all but a skeleton staff. That's quite a reversal for the charismatic Moussouris, 46. A Rhodes scholar and former roommate of William Randolph Hearst III at Harvard University, he co-founded MIPS Technologies Inc., a company that developed the microprocessors that are currently used by Silicon Graphics, Nintendo, Sony, and others. Now, he concedes, ``nothing is certain.''

INJECTING SMARTS. Ambition may have gotten the best of Moussouris. Micro-Unity's plan relied on a risky new chipmaking process, and he insisted on building an expensive factory, which is an unheard-of undertaking for a startup. Moussouris' technology road map was also flawed. His chips were supposed to inject more smarts into everything from television settop boxes and cable modems to digital cellular telephones--thus blunting the charge of Intel-based PCs into multimedia and communications. But these potential target markets failed to develop. In addition, the chips proved difficult to manufacture. Last spring, Moussouris sought more equity financing, bringing in investment bankers to assess options, such as going public. Instead, they advised him to scale back.

Moussouris insists that his dream is still alive. He plans to license Micro-Unity's technology to makers of cable modems, cell phones, and other devices. But that may not be easy. Observes Alexandre Balkanski, CEO of multimedia chipmaker C-Cube Microsystems Inc.: ``I don't think he understands the nitty-gritty, day-to-day pressures of running a successful company.'' Maybe, but he's going to have to learn fast.

By Robert D. Hof, with Andy Reinhardt, in San Mateo, Calif.


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Updated June 14, 1997 by bwwebmaster
Copyright 1996, Bloomberg L.P.
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