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Krisbergh Weighs WorldGate Changes After Asset Sale

At this point, one of the few things at WorldGate Communications Corp. that remains the same is its name.

The struggling firm, which counted about 350 employees in 2001, now staffs a skeleton crew of 30. Its core assets are history, since WorldGate closed a $3 million deal last week to sell its interactive television holdings to TVGateway LLC, the small interactive program guide company backed by Comcast Corp., Cox Communications Inc., Charter Communications Inc. and Adelphia Communications Corp.

Now the WorldGate corporate name could go away, given a repositioning to sell videophones to cable operators under the Ojo brand, CEO Hal Krisbergh said last week. "Names have value, and one could argue, 'Maybe you don't want to associate WorldGate ITV with the future of Ojo,' and that's an interesting strategic question," Krisbergh said.

Although he hasn't made a final decision on whether to change the company's name to Ojo, Krisbergh has grounds to drop the WorldGate moniker, which many cable industry players associate with its failed efforts to widely distribute its ITV system on cable systems.

At its peak, WorldGate had between 600,000 and 700,000 subscribers and had deployment commitments from Comcast, Cox, Adelphia and Charter, Krisbergh said.

He blamed several factors on WorldGate's downfall, including: Comcast's acquisition of AT&T Broadband; Cox's decision to roll out interactive program guides from Pioneer Corp. instead of TVGateway; Adelphia's Chapter 11 bankruptcy filing; and Charter's "financial issues."

"We were very happy campers two years ago, and then things started to rock and roll a little bit," Krisbergh said, suggesting that all of those MSO developments made deploying WorldGate less of a priority.

WorldGate's stock, which traded around $50 at the end of 1999, fell steadily as it failed to gain new deployments. Its share price has remained under $1 for the last year, closing Thursday at 55 cents.

WorldGate nearly ran out of cash earlier this year, prompting the ITV asset sale. It held talks with about 50 companies, including other ITV players, Krisbergh said.

WorldGate's strategy is to act as a shell to develop the Ojo videophone, a product Krisbergh said he first contemplated 12 to 15 years ago when he worked at the former General Instrument Corp.

The $3 million that WorldGate received from the TVGateway sale will be used to fund Ojo.

Krisbergh said the prototype Ojo videophone will be out in four weeks, and the company has an agreement with a major MSO to trial the product by year-end. "We'll be in full production by next summer," he added.

Cable operators have begun talking up the potential of Internet protocol telephony to offer more than just plain calling, and video would be an attractive feature, they say.

One example: Insight Communications Co. CEO Michael Willner told analysts on Aug. 1, during an earnings conference call: "From a consumer point of view, we look at IP as delivering something more sophisticated than plain telephone service. We would prefer to compete with telephone companies exploiting our platform to its fullest. That may mean a video telephony service, and providing data on the telephone screen."

Following a model similar to that of cable-modem manufacturers, WorldGate hopes to sell the Ojo phones, manufactured by Taiwan-based Mototech, an affiliate of Accton Technology Corp., to operators for about $200 to $250 apiece.

MSOs would then sell the phones directly to subscribers for $300, Krisbergh said, adding the devices could also be sold through retail outlets.

Unlike its ITV strategy, WorldGate won't share monthly subscription fees with operators. WorldGate will only make money on the phone sales, and it'll recommend that operators collect $15 to $20 in monthly fees from subscribers who want the videophone, Krisbergh said.

Jeff Pulver, the founder of Free World Dialup and a pioneer in Internet-protocol telephony, said last week that he has "a newfound faith in the videophone's potential." Pulver said the widespread availability of broadband Internet access in the U.S. bodes well for videophones, but that social issues remain a concern, since many people may feel uncomfortable using videophones.

Vonage Corp., which sells IP phones that cable modem and DSL users can use to make cheap calls via the Internet, has considered developing a videophone. But the company doesn't expect to release a product in the near future, said executive vice president of product development Louis Holder, who currently doesn't see a big market for that technology.

Still, he acknowledges that the products could prove popular with businesses or consumers that want to talk in person with family members overseas.