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INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads | | SEPTEMBER 7, 2000 TECHNOLOGY Souping Up Your Old Analog Set A small San Jose chipmaker is offering an interactive solution for the many millions of nondigital TVs worldwide
What's unusual is that Narayan sees this happening on an old-fashioned analog set, not a high-end, high-definition TV. And he insists his technology won't cost consumers more than $100 on top of the cost of a TV. Best of all, they won't have to wait for the long-delayed arrival of a digital broadcast or cable signal. Narayan's San Jose-based chipmaker, TeleCruz Technology Inc., is just one of many small companies working on ways to jump into the interactive-TV market. One big difference is that his is a low-cost, here-and-now approach to a highly technical area. Launched four years ago, TeleCruz hopes to deliver a TV-PC hybrid to mass audiences in the U.S. and abroad. It comes in the form of a chip and software platform that can be embedded in a new analog TV for about $25, or placed in set-top boxes expected to retail for between $80 and $100. The chips support all of the elements of Narayan's vision -- including Internet access and enhanced programming from companies such as Wink. What they lack are the flashier features promised by digital TV, such as the ability to watch and record any show at any time. SIMPLE LOGIC. "Our premise is that the interactive-TV market is going to ignite when the right features get in front of the consumer at the right prices," says Narayan, a native of India, who oversaw business development at a division of Cirrus Logic before heeding the entrepreneurial call. The strategy has resonated with investors. TeleCruz has raised $34 million in venture capital, with a fourth, pre-IPO round now in the works. One of the biggest investors, with a 9% stake in TeleCruz, is Gemstar-TV Guide International Inc., a small Pasadena (Calif.) company that licenses an electronic programming guide expected to be one of the most popular interactive-TV applications. Other investors include the Zeron Group, Crosslink Capital, Fuji Bank of Japan, and Institutional Venture Partners. Part of the appeal, says Michelle Abraham, a senior analyst with Cahners In-Stat Group, is that "most of the other chip manufacturers are developing solutions to go into digital set-top boxes" at a time when there are still "millions and millions and millions" of analog sets worldwide. TeleCruz, which has 85 employees and offices in six countries, is targeting markets in the U.S. and abroad. The company is shipping chips to four major television and set-top-box makers, with the first TeleCruz-equipped models expected in U.S. stores by the end of the year. TeleCruz is also filling orders from Asia for 50,000 chips by the end of the month, with sales in the region predicted to double each quarter for the next year. In India, a major consumer-electronics company, Videocon, is poised to begin selling TeleCruz-equipped set-top boxes in November. TeleCruz' biggest market may prove to be outside the U.S., particularly in countries where demand for Internet access is high but PC ownership is low. In China, an obvious target, a mere 1.5 million people are online, and in Japan the figure is 9.75 million. Those numbers make for a stark contrast with the U.S., where 83 million adults enjoy Internet access. At the same time, digital TV is expected to grow in the U.S. over the next five or six years as cable operators upgrade their systems and broadcasters switch to digital signals. A federal mandate calls for stations to end their analog signals by 2006, though the requirement also includes a huge loophole: Broadcasters can delay switching to a digital signal if more than 15% of viewers are still without digital TV. FUZZY SIGNALS. The truth is, no one can really predict when the knot of technical problems surrounding digital TV -- such as common component standards -- will be unraveled. But when that happens, and digital TV finally reaches a mass audience, TeleCruz risks being eclipsed in the U.S. market. True, the company is developing a next-generation chip for digital TVs and set-top boxes that will support TiVo and Replay, programs that turn a TV into a VCR. But with the digital field already crowded, TeleCruz will face competition from much larger chip and consumer-electronics companies, like Philips Electronics, which is making digital set-top boxes for cable, satellite, and broadcast signals. Still, even as that conversion occurs, TeleCruz is betting there will be a window of opportunity as Americans crave a cheap introduction to interactive TV while they cling to their analog sets. The trick, says Narayan, is to pare parts and applications to a minimum. "You're dealing with an audience that wants simplicity," he says. Perhaps so. But predicting where interactive TV is going, or what hardware and software will be needed to get it there, won't be so easy. As is so often the case with technology, what is complex and expensive today is bound to become simpler and more affordable -- and that can only add to Narayan's competition.  By Julie Fields in New York Edited by Robin J. Phillips  | | |
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