They Can't Wait To Serve You

On Jan. 12, Bell Atlantic Corp. gave makers of large-scale computers a shot in the arm. The Philadelphia-based Baby Bell announced that it will spend some $25 million for three new supercomputers plus software to build a first leg of the Information Superhighway. Two companies--nCube Inc. in Portland, Ore., and software maker Oracle Systems Corp. in Redwood City, Calif.--will share the spoils. But all makers of "big iron" are celebrating. With the Bell Atlantic deal, a new market is opening: giant servers to feed digitized movies, home shopping, games, and other interactive multimedia services to homes across the country.

Makers of mainframes and supercomputers see this as the start of a bonanza--and they could use one. Last year, mainframe sales fell 9%, on top of a 1% decline in 1992, according to International Data Corp. Sales of minicomputers priced at $1 million and up are shrinking by 20% annually. And massively parallel supercomputers have been slow to catch on. So the companies are refitting mainframes, adding new software to supers--and designing all-new, specialized "video servers" to feed the coming interactive-TV market. That business could be "the basis for the revival of big iron," says Forrester Research Inc. computer analyst William M. Bluestein. "The joke here is interactive TV is a plot by the computer industry."

SERVICE CENTERS. Still, it's a gambit that could be tricky to play. By itself, say analysts, the business of equipping cable and phone networks with video servers may never be more than a $3 billion market--just 1% of today's worldwide computer market. But selling servers for movies on demand could help develop other markets such as video-based business-information services. Puzzled factory workers, for instance, could call up video clips to brush up on difficult assembly procedures. Between the Information Superhighway and business markets, Digital Equipment Corp. officials reckon that by the year 2000, some 10% of its revenues will come from giant servers.

Video servers could also spark huge service revenues. For instance, DEC envisions setting up media service centers around the country to help retailers create video-shopping services. DEC Media Business Seg- ment Managing Director Robert L. Griffin estimates that for every $1 of video-server sales, there could be $7 in related services. IBM and American Telephone & Telegraph Co. also have a lot of service and networking experience, which puts them in a good position for this market.

And computer makers are eager to supply other pieces of the Information Superhighway. Hewlett-Packard, DEC, and IBM are vying for contracts in the $500 million cable-TV-converter market, either supplying chips or selling complete boxes. They are trying to forge relationships with traditional cable-box suppliers Scientific-Atlanta, General Instrument, and Philips. Other computer-industry players such as Silicon Graphics, Intel, Microsoft, and British chipmaker Advanced RISC Machines have the same idea.

Video servers could prove tough for even DEC and IBM. In digital form, a feature film takes 2 billion characters, or bytes, of computer storage. Just a few dozen of the tapes in any video store would, if digitized, exceed the 100 billion bytes or so used by the largest airline reservation systems. And unlike, say, banking transactions, video data streams can tolerate no more than microscopic delays in transmission. "You can't afford to have the ballet look like break dancing," says Tony Ruiz, senior manager for communications systems at IBM's T.J. Watson Research Lab.

CHEAPER BY THE DOZENS. That's why many players are insisting that only a massively parallel machine--such as the nCube machine selected by Bell Atlantic--will do. These systems use thousands of processors, each with its own memory. Video servers "will all be massively parallel computers," predicts Oracle Systems Chief Executive Lawrence J. Ellison, who also is part-owner of nCube. Bell Atlantic Large Business & Information Services Group President Stuart C. Johnson adds that massively parallel machines can be more easily expanded as demand grows.

But no one can be counted out yet. IBM has snared server contracts at Ameritech, Cox Communications, and Bell Atlantic, while DEC has captured U S West, Rochester Telephone, and Canada's Stentor, a consortium of nine telephone companies. Phone companies figure that scattering dozens of video servers will be cheaper than deploying one massively parallel machine.

Whichever type wins, consumer services such as movies cn demand will continue to be the focus of the hoopla for now. With cable systems in 60 million homes--and with an additional 30 million that could be added--couch potatoes look like a mighty appetizing opportunity.

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