‘Evangelising’ Pace’s XTV box ready for release
Pace Micro Technology will launch its XTV integrated sat-box plus hard drive unit this quarter, according to CEO Malcolm Miller. He confirmed the highly specified box will not receive a BSkyB subsidy, and will be sold through the retail sector. Miller declined to reveal the unit’s target retail price.
Technology head Andy Trott says he expects hard drive units to eventually dominate the sector although he appreciates that initial sales would probably be modest. “Once people have used one they will not want to go back. At the end of the day it is the applications within the box that make it tick and sometimes these are outside our control. It is important that people have the hard drive attributes explained to them, and I have heard some [people] say they’re not getting much for their money. We know they might approach the product with scepticism, but once they have it we know they’ll not want to give it up. How will we break that barrier? It will take time but we have to evangelise the product.”
Trott accepts that as a retail only unit – that is without Sky’s subsidy – “Putting a figure on the potential sales is a tough question. If it is a retail only product then the percentage [who take it up] is going to be fairly small. While the market still sees getting a free set-top box as their route to digital TV then it will be difficult.”
Miller showed a prototype box at Pace’s half-yearly results last week, while finance director John Dyson reported a continued improved financial picture for Pace – “Best for three years”, with “all segments growing,” says Miller. Revenue is up 31 per cent to £205.8 million (same period 1999: £157.2m), with pre-tax profits up 41 per cent to £17.9m (E27.72m). Pace continues to invest heavily in R&D, both here in the UK where it now has three facilities and its USA base (at Boca Raton). Engineering headcount now stands at 511.
The UK remains Pace’s primary market, and still represents 87 per cent of revenues, although marginally down from the 92 per cent of a year ago. Miller says he expects this decline to continue with UK market share contributing nearer to 80 per cent of revenues over the current six trading months. Component shortages have also eased somewhat, partly due to better planning. Miller says the rate of digital growth – as far as the UK is concerned – will slow, while in his view the United States’ digital take up will accelerate.
Pace has two major US cable wins to still exploit, in Time-Warner and Comcast. Their first Time Warner boxes start shipping this spring and Comcast “early in the autumn” says Miller.
Europe remains a disappointment for Pace, which Miller blamed firmly on the strength of the Euro, which threatened to squeeze margins too tightly “and has affected our sales in France to Canal Plus,” he added. Pace believes the UK will switch off analogue transmissions sometime this decade and are planning to introduce a low-cost analogue-to-digital home converter box good only for free-to-air terrestrial channels.
Miller also revealed that currently Pace is supplying more digital cable than satellite boxes. He was coy on the specific box numbers supplied, nor would he be drawn about ONdigital’s position in the market (Pace supply boxes to all three sectors). “The cable companies have invested heavily in their networks, buying content at a large cost. The cost of deploying set-top boxes, while important to [our business] but as part of cable’s aggregate expenditure it is not so large. If they don’t complete [this digital roll out] then they will have spent a lot of money on only a quarter of the solution.” He added that one year ago digital satellite was the backbone of Pace’s box-sales, “but now cable is 60 per cent of our business.”
Other new products shown were the home networking (Gateway) controller and the ‘Shopping Mate’ PDA device, in development with Phillips.