A Year Ago: NCD to tap Intel chips for 'lean' clients

First published: Tue, 10 Mar 1998 12:28:14 GMT

Network Computing Devices Inc. said Monday it signed a three-year deal with Intel Corp. to make systems using its processors.

Network Computing Devices (NCD) said it will develop so-called "lean client" systems, which are scaled-down computers aimed at replacing dumb terminals for mainframes and minicomputers-using an unspecified version of Intel's Pentium processor.

Intel revealed its lean client spec in early December last year.

"All the pieces will be in place by summer," said NCD chief Bob Gilbertson. "We will be ready with an Intel solution."

As part of the agreement, Intel (INTC) has purchased 750,000 shares, or 4.4 percent of the Sunnyvale, Calif., company.

The alliance completes the Wintel puzzle for the thin-client computer maker. NCD has been working with Microsoft for more than a year on thin-client computing, which uses terminals to display information processed on remote servers.

The Intel agreement comes three months after the chip giant announced it had developed a set of specifications for the creation of lean clients.

"This is kind of an endorsement of the entire idea of the lean client," said Greg Blatnik, industry analyst for Internet watcher Zona Research Inc. "Intel now recognizes that there is a space below the PC that is a legitimate market space and that has its own requirements."

In addition, NCD produces network computers and terminal replacements for IBM Corp. (IBM) This gives the company some flexibility-the IBM computers use IBM's PowerPC chip-not an Intel chip.

Revenue relief?

The deal offsets news from NCD that the company will lose money in the first half of 1998.

"The problem is not sales," said NCD's Gilbertson. "It is price pressures. Our revenues are shrinking because the market is becoming increasingly competitive." NCD's stock was down $2.50 to $11 in moderate trading on Monday.

Gilbertson expects the market to take off during the summer, as soon as Microsoft releases its Windows CE-based terminal operating system. This year, said the CEO, sales should reach 200,000 units, of which NCD intends to take a third.

If it can keep that share of the market, NCD is in for a hot ride. Market research International Data Corp. forecasts the market for terminal replacements will hit 10 million units by 2001.

A network computer by any other name? The deal could spell bad news for supporters of the network computer alliance.

Why? Because Intel has only recently become enamored of lean-client computing. The Santa Clara, Calif., company spurned the idea of the lean-client computer until the middle of last year. In addition, two aspects of terminal computers- cheap and low-power-are not adjectives that usually describe Pentium processors.

Both of the points were recognized by NCD when it joined IBM in an initiative to create a Java lean-client terminal.

Yet this year, the company has again turned to the Wintel alliance. "We firmly believe that they are pretty successful in the PC business," said NCD's Gilbertson. "From what we have seen (of their products), they are going to be strong in this market as well."

With both Microsoft and Intel recognizing terminal-based computing, companies supporting the concept of a non-Wintel network computer may find themselves shut out.


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