Home Director to Get Funding to Wire Your Home

SAN FRANCISCO (03/20/2000) - Home Director Inc., the home networking company that was spun off from IBM Corp. at the start of this year, expects to announce additional funding and new partnerships in the coming weeks that could boost its plans to wire homes in the U.S. for the Internet, company officials said here last week.

Home Director provides hardware, software and services for building home networks that make voice, data and video services available throughout homes from a multitude of devices, including telephones, PCs and emerging appliances like Web tablets. The networks can also include home security cameras, and be used to centrally manage controls for home features such as heating and lighting, company officials said in a interview here last week.

The IBM spin-off expects to close a round of private placement funding in the next six weeks that could yield between US$25 million and $75 million, according to a source familiar with the matter. Mark Schmidt, vice president of marketing for Home Director, declined to comment on those figures, but confirmed that potential backers include Cisco Systems Inc., home appliance maker Whirlpool Corp., department store Sears Roebuck & Co., and Motorola Inc.

Home Director also hopes to announce that Sears has become one of its strategic partners. Tentative plans call for Sears to resell the Home Director system to customers who visit its department stores to buy, say, home furnishings, and to offer those customers financing options, Schmidt said.

However, don't expect to pick up Home Director's products on store shelves -- the system will be sold in the U.S. through a network of systems integrators, or installed in newly-built homes aimed at well-heeled buyers. Home Director has also partnered with service providers like regional carrier Bell Atlantic Corp., which plans to resell the network system bundled with content and other services, Schmidt said.

At the heart of the offering is a product called the Network Connection Center, a glorified wiring hub that accepts data from telephone lines, satellite broadcasts, cable and other broadband Internet connections, and distributes that content around a house. The system can support up to four telephone lines, 16 video inputs, four PCs and four in-house security cameras, Home Director officials said.

Home Director hopes to upgrade Network Connection Center in the fourth quarter of this year with a version that will support additional standards including the HAVi (home audio video interoperability) format, which is used to link consumer electronics equipment; the wireless Bluetooth standard, and a 10M-bps (bit-per-second version) of the HomePNA (Home Phoneline Networking Association) format, which allows telephone wires to be used to transmit computer data, Schmidt said.

Installing a basic system costs between US$500 and a few thousand dollars, depending on the configuration, Schmidt said. The company claims to have installed about 10,000 systems in the latter part of 1999, and hopes to reach an additional 50,000 to 70,000 homes this year.

"When you add the costs to the price of a new home, and you're looking at a few dollars a week, I think it's going to be worth it," Schmidt said.

The company is aiming its product at an emerging generation of relatively affluent home buyers who grew up with PCs at home or at college and who would appreciate the benefits of installing a complete home computer network, Schmidt said.

"There's a perception among some consumers that no new wires is a viable option today, but it's not," he said. Receiving the full spectrum of broadband content expected to become available in the coming years will require at least some degree of new wiring for the home, he said.

Home Director is betting that consumers would rather have a home network installed on their behalf by a service provider, rather than buying assorted products from the company's rivals like Intel Corp., 3Com Corp. or Diamond Multimedia Systems Inc. which consumers would have to install themselves.

The company is also betting that more companies like Bell Atlantic, including broadband ISPs (Internet service providers), will see the benefits of partnering with Home Director to resell its service and provide content and support services. Those companies will benefit from teaming up with Home Director because the company provides an infrastructure through which to deliver more sophisticated and varied content, Schmidt said.

"A lot of deals, like the Time Warner-AOL (merger), promise to deliver great content to people's homes. But the big question that hasn't been addressed is how are you going to get it there," Schmidt said.

Based in Research Triangle Park, North California, Home Director can be found on the Web at http://www.ibm.com/homedirector/.

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