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Eyes Are on Rearden And Its Cable Tie-Ins

WebTV Networks Inc. founder Steve Perlman is heading a stealth technology and production company that's armed with cash from AOL Time Warner Inc., Vulcan Ventures Inc. and EchoStar Communications Corp. and plans to build a new home-entertainment device.

The company, Rearden Steel Technologies, isn't saying exactly what the box does, or when it will be available. When Perlman announced an eye-popping initial financing round of $67 million on April 23, he didn't discuss any specific details about the product.

In various accounts, Perlman's project has been portrayed as a home-entertainment/home-networking set-top device that combines television, Internet, gaming, graphics and imaging functions in an inexpensive box.

AOL Time Warner's ties to the company raises the question of whether Time Warner Cable would use its box. A Rearden spokesman would not comment.

A Time Warner Cable spokesman said the company has discussed ways to help determine what the Rearden Steel device would do, and to eventually test it, but declined comment on any possible purchase commitments.

The MSO is interested in technology that addresses home networking, he added.

Rearden founder and CEO Perlman created WebTV before selling the company to Microsoft Corp. for $425 million in 1997. He's drawn a raft of Silicon Valley and ex-WebTV engineers to his new venture, including chief operating officer Bill Keating, a former WebTV executive.

In an interview with CNET, Perlman said: "Whatever the set-top box is, it should be very inexpensive. The DCT-5000 tries to be too many things, is very expensive and that's the reason we haven't seen widespread deployment from MSOs."

Cable experts said new set-top-like devices face several hurdles. Rearden would have to work with Scientific-Atlanta Inc. and Motorola Inc. on conditional access through legacy cable-system headends. It would also take time for Rearden to achieve scale in the set-top market.

But Rearden could reach scale more quickly if the device were sold through retail channels and became a smash hit. And the OpenCable standards-setting initiative could help moderate integration issues with present-day cable plant.

A retail play would mirror Perlman's history with respect to WebTV, which originally appeared as a retail device and was ultimately integrated into direct-broadcast satellite set-tops.

Rearden also said it has developed partnerships with Home Box Office, Discovery Channel, The Weather Channel, Columbia Television, E! Online and Excite@Home Corp. with respect to production and graphic-imaging technologies.