Remember Interactive Tv? It's Active AgainSpencer E. Ante
Liberate Technologies' Mar. 21 briefing with Wall Street analysts was a romp for Chief Executive Mitchell E. Kertzman. The interactive-television software maker reported such strong financial results that its stock surged 15% the next day, to 80 1/2. During the conference call, Kertzman zoomed through the highlights with narry a hitch, finishing in 15 minutes flat. Afterwards, Liberate execs were so pumped that they snickered at analysts' questions behind their backs. "One down, an infinity to go," joked Kertzman as he wrapped up the call.
Cocky? Sure, but Kertzman has his reasons. Thanks to a string of partnerships with cable operators and other companies, the four-year-old Liberate has a chance to become the leading player in interactive-TV software. After failing dismally in the 1990s, the interactive-TV market finally seems set to take off, thanks to improvements in the technology and the advent of the Net. With the new software, set-top boxes let you get replays or different camera angles on your TV during basketball games, and they let you click to related Web sites. While only 400,000 U.S. households will use interactive TV by the end of this year, that's expected to soar to 29.4 million by 2004, according to Forrester Research Inc.
The potential has enthralled Wall Street. Even after Liberate's stock price, like that of most technology companies, dropped in recent months, it still had a market cap of $3.6 billion--this for a company that is expected to lose $54.6 million on revenues of just $26.1 million in the fiscal year ending in May, according to Chase H&Q estimates. Kertzman thinks that the backing of Oracle Corp. and partnerships with cable players such as Comcast should give him the dominant share of the North American market. "My goal is 100% market share," he says. "Otherwise, why get up in the morning?"
"STRONG JUMP." Kertzman may be getting ahead of himself. While Liberate is well-positioned in the U.S. and Canada, it's far behind in overseas markets. Silicon Valley rival OpenTV Corp. has deployed 6 million set-top boxes in Europe, while Liberate only has 120,000 customers in a trial with Britain's Cable & Wireless Communications. An even bigger challenge may be winning over fickle consumers. So far, there's scant evidence that couch potatoes will pony up another $15 a month for interactive TV. "We need to see Liberate deployed in people's actual households," says analyst Kevin Hause of International Data Corp.
Still, Kertzman has strong support. Cable & Wireless signed up with him even though Microsoft Corp., which makes rival software, invested millions in the cable company's parent. Telewest Communications, another cable player in which Microsoft made a big investment, also snubbed the software giant to go with Kertzman. And America Online Inc. plans to roll out interactive-TV service using Liberate software this summer. "Liberate has a real strong jump on the market," says Barry M. Schuler, president of AOL's interactive-services group and a Liberate board member. So forgive Kertzman if the praise goes to his head.
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