Tracking Stephen Dukker's Thin Client Dreams
Posted by: Peter Burrows on September 03, 2007
Dukker, then CEO of eMachines, helped make the PC affordable for millions in the 1990s by pioneering the market for PCs priced as low as $400. But when PC market unit growth hit the wall, eMachine’s razor thin margins—maybe 6% in the best of times—were not nearly enough to weather the storm. Dukker was ousted.
A few years later, he was back, with what he hopes is a better way to deliver low-cost computing services to consumers. He now runs nComputing, which makes a kind of “multi-user computing” technology that leverages today’s PCs by divvying their power into as many as thirty parts. In the demo I saw at the firm’s new Redwood City digs, seven monitors are hooked up to small nComputing devices that in turn connect to the PC, and a different application is shown on each of the monitors. There’s “Finding Nemo” playing off a DVD, a TV show delivered through SlingBox, an MPEG2 video through Media Player, a PowerPoint presentation, a web browsing session, a YouTube video, and a word document.
It’s an impressive demo, as demos go. And the price sounds impressive, too. Given that those gizmos are little more than a cheap communications chip built around nComputing software, the company’s hardware cost is just $11. The company typically charges $70 for each “seat” of the technology (that doesn’t include the price of the monitor, mouse and keyboard—but it’s still far below the $500-plus price for a decent PC).
That's what Dukker told us a year ago, when we ran a story on the company. But when I interviewed him again a few weeks ago, I will admit to being somewhat surprised to see that the company is right on plan. Maybe even ahead of plan. The firm is on track to sell 500,000 seats of its technology by the end of the year. Roughly 90% are to schools. Dukker claims to already have 2.5% of the US education market, thanks to uptake by rural school districts in places like Utah and North Carolina (where 19 districts with more than 10,000 kids have signed up, he says).
The technology seems to be getting at least some traction in a wide variety of places. nComputing has deals with a big Yellow Pages unit in California, from the Communist Youth League of Vietnam, and with the Church of Latter Day Saints, for use in its geneology research centers. In Sept., they’re going to announce that they beat some big PC rivals to win a contract to provide a desktop to every student in one developing nation (the deal has been inked, he says, but not announced).
This modest success is light years from fulfilling Dukker's ambitions. He thinks the technology is a far better approach to getting PCs into the hands of the world's poor kids than MIT's $100 PC. The purchase price is lower, and the support costs could be lower as well (only one PC to fix, to solve seven people's problem). Since nComputing's devices run on only a few watts, versus 200 or so for a PC, he says most customers find the energy savings pay for the nComputing technology in a matter of months.
So will nComputing become mainstream? That still seems like a very long shot. For starters, towns or schools that don't have good broadband networks are out of luck, and many slick-sounding thin client schemes have failed for lack of good performance. Many people--most people, actually--would rather have their own computer than share one (especially one that is wired, meaning you can only use it at school/office). There are licensing issues related to divvying up one copy of Windows for multiple users. One industry CEO that has looked at nComputing's approach says "there are better approaches" available.
And yet there's a sense of momentum at the 105-person company. Much of that probably has to do with Dukker, who is thrilled with the un-PC-like economics of what the nComputing is up to. Though revenues will be only $20 million or so this year, the company makes about as much on each of those $70 seats as eMachines used to make on a $500 or $999 PC. “We already have the profits of a $300 million PC company,” he says.
That's not just good for nComputing and its investors, says Dukker. It's also good news for the VARs, distributors and others channel partners who are struggling to make a buck moving PCs, and might also be looking for a better way. "A VAR who makes $25 on a $400 PC can make $60 on a $200 nComputing device-and there's less set-up time," he promises. He argues that lack of profit could stall progress for the MIT's One Laptop Per Child program. "You've got to be able to build an ecosystem that can afford to take care of the customers. We share aspects of Negroponte's vision, but it's in a commercially viable way."