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Upstart's Internet 'TV' has Microsoft tuned in ----------------------------------------------------------------------------

(Jul 30, 1996 02:00 a.m. EDT) A small company's big new idea for the Internet sparks talk of technological revolution and vast new markets. Microsoft Corp. notices all the hubbub and mobilizes to catch the wave.

It happened last year with Netscape Communications Corp., whose Web browser grew so popular that Microsoft was spooked into its current all-out Internet campaign. Now, that theme is playing out again, this time involving a Silicon Valley start-up called PointCast Inc., the pioneer of a new field some call "Internet broadcasting."

PointCast's free software, which has "must-have" status for in-the-know computer owners, turns a computer terminal into a kind of high-tech, multimedia TV set, displaying news, sports scores, stock charts, weather updates and a growing list of other kinds of information. The program downloads all this automatically, while users are doing other work, via an existing Internet connection. At a company, that would happen in a few minutes over a local area network; at home, the computer's modem would make a phone call to establish the link.

The notion of getting information on-line, of course, is hardly new. PointCast, though, assembles everything in a single eye-catching package without computer owners having to hunt it down. The information then appears on the screen after the computer goes off-line in place of a traditional screen saver; it can also be called up directly.

PointCast's president and chief executive, Christopher R. Hassett, says that millions of copies have been downloaded from the company's Web site since its February debut. It's so popular, in fact, that it is banned in many companies, since hordes of PointCast users updating their screens can severely tax the "bandwidth" of a company's computer network. Others worry about their employees' "mental bandwidth:" Edify Corp. President Jeffrey M. Crowe complains that so many of his workers use PointCast to monitor the constantly fluctuating price of the company's stock that he worries about anything getting done.

Still, analysts say that PointCast has stumbled onto what could be an important new marketplace: providing the link between advertisers and millions of desktop computers, in the process making computers a new version of television, albeit one in which owners get to control the programming. PointCast, says Adam Schoenfeld of Jupiter Communications in New York, is "a neat implementation of Internet technology. A lot of companies wish they had done it first."

And No. 1 on that list, he says, is Microsoft, whose "entire story has been based on maintaining control of the desktop. Now, PointCast is delivering information directly to the desktop. Now it's information, but it could also be software. That's a very big danger to Microsoft. They don't want anyone in on that turf."

PointCast's influence on Microsoft has become apparent in recent days, as Microsoft has begun previewing the final versions of the new Internet software that it will start shipping in the next few months. By and large, that software makes good on the plans the company announced in December to weave Internet-style software throughout Windows.

That means, for example, that for users who elect to use the optional new software, a traditional directory of a "desktop" showing folders and files will be presented on a Web-style "page," that also might show, for example, software tips or daily "to-do" lists.

Microsoft calls that sort of added information "rich content" and predicts it will become a major new part of the everyday user experience for Windows users. "Any place we could find a big, flat space on the screen, we take it over," says John Ludwig, vice president of Microsoft's Internet division.

What's new between December and now, though, is that there is a very PointCast-like cast to much of the "rich content" that Microsoft is previewing. Last week, for example, one portion of Mr. Ludwig's demo screen had information from MSNBC, Microsoft's all-news joint venture with NBC. In fact, it was Mr. Ludwig who first raised the similarity between the new software and PointCast, saying that the view at Microsoft is that PointCast is "very, very cool."

He's uncomfortable, though, with any suggestion that PointCast, based in Cupertino, Calif., had become this year's Netscape, in the center of Microsoft's sights. "They aren't what lead us down this path," he says. "The acceptance of PointCast was more of a confirmation of what we were already doing. We don't look at PointCast as a competitor."

But that's not the way PointCast sees it. "We are absolutely competitors," Mr. Hassett says. "You better believe there is going to be a battle."

PointCast will soon begin selling a $1,000 package to companies that allows them to put their own information on PointCast screens within their corporations, and also deal with the strain on their networks that program causes. Despite that, Mr. Hassett says the battle with Microsoft isn't over selling software, but instead over being the intermediary between computer owners on one hand and advertisers and "content providers" from the media world on the other. All of the closely held PointCast's revenues, which it declines to disclose, are from its ads. PointCast has the edge in this new field, Mr. Hassett maintained, because Microsoft's recent forays in broadcasting and print media have caused other media companies to view it as a rival.

PointCast clearly has momentum. The company has 140 employees, double the level of six months ago, and today is expected to announce $36 million in investments from such media concerns as Times Mirror Co. and Knight-Ridder Inc. as well as technology suppliers like Compaq Computer Corp. and Adobe Systems Inc. PointCast has previously announced deals with Cable News Network and the Boston Globe, among others, as well as $12 million in earlier financing from venture capitalists.

PointCast, though, does not only have Microsoft to worry about. Berkeley Systems Inc., which makes the popular "AfterDark" screen saver program, has PointCast-style software slated for a September introduction; it also says it is also talking deals with "top, national" media companies.

While saying that Microsoft has "aggressive" plans to itself use its new technology to provide content and advertising similar to PointCast's, Mr. Ludwig notes his company's new software is open, allowing even competitors to bypass Microsoft entirely and reach users directly. That, he says, makes for a big difference between Microsoft's approach and PointCast's, which insists on being the middleman. "We want a million content vendors to bloom," Mr. Ludwig says.

While a huge fan of PointCast, Mr. Schoenfeld, the industry analyst, says he is nonetheless concerned about its future. "It's dangerous to impress Microsoft too much with an innovative application," he says. "Ask Lotus 1-2-3."

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