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Moxi Maker Digeo Slashes Staff, Product Line

Remember those ambitious retail plans Digeo Inc. was singing about last week at the Consumer Electronics Show (CES), and that $1,000 multi-room, hi-def digital video recorder (DVR) outfitted with a CableCARD and a barge-load of IP-fed applications? (See Digeo Revs Up for Retail.)

Never mind.

Just days after the 2008 show in Las Vegas came to a close, the Paul Allen-backed company opted to slash its staff by half and whack two products tagged for retail distribution: the Moxi Home Cinema Edition DMR and the already-delayed Moxi Multi-Room HD DMR.

CEO Mike Fidler, who was on hand at CES, has resigned but will stay on to get Digeo through a transition period. He is being replaced by current president and COO Greg Gudorf. Both are former Sony Corp. (NYSE: SNE) executives and have been together at Digeo since late 2005.

Other than all that, it's business as usual at the Kirkland, Wash.-based company, which, in 2002, merged with Moxi Digital (formerly called Rearden Steel), a company originally helmed by WebTV founder Steve Perlman.

The rapid reversal comes as a surprise, considering that the company was telling a much different story just a week ago, openly discussing an anticipated charge into a retail market that would have pitted it against TiVo Inc. (Nasdaq: TIVO) in stores and also against more "generic" DVR/set-top combos offered directly through cable operators. The abrupt move suggests that Allen no longer had the stomach for the existing business plan and forced Digeo to make significant changes on the fly.

The company made the announcement Tuesday (Jan. 15) but officials were not immediately available to provide further comments for this story.

In its statement, Digeo said the layoff, which leaves it with about 80 employees, primarily hits "positions that are not critical to development of the new products."

Digeo said it will now turn its attention to a "next-generation consumer DMR" already under development, with details to be announced later this year.

At the same time, Digeo still plans to launch a cost-reduced hi-def DVR for direct distribution through MSOs that will support the removable CableCARD. Digeo has been without a viable cable set-top product ever since the Federal Communications Commission (FCC) ban on integrated security set-tops went into effect last July. (See Countdown to 'Seven-Oh-Seven'.)

To date, Digeo claims to have shipped more than 400,000 units to a total of eight cable operators. The bulk of those shipments were to corporate cousin Charter Communications Inc. . Digeo said the new cable-direct box is in trials.

Tied in with the new product strategy, Digeo said it will "flatten the structure of the development organization," separating into three new engineering groups that all report to Gudorf.

"Previously, we were spreading our energies across too many platforms," Gudorf said in a statement.

"With our revised product strategy, it made sense to realign our leadership team as well," Fidler added. "I remain very enthusiastic about Digeo's mission, its Moxi products, our partnerships, and Greg's leadership capabilities."

Although Digeo's initial retail set-top entry was geared to target a small but passionate group of high-end video enthusiasts, the decision to pull back now only slows down cable MSO ambitions to develop a retail market.

Last week at CES, the cable industry officially rebranded the OpenCable Platform as tru2way. Comcast Corp. (Nasdaq: CMCSA, CMCSK) chairman and CEO Brian Roberts also delivered a keynote, pledging that cable was ready to open up its video platform and do a better job cultivating a retail channel for cable-ready, interactive digital set-tops and televisions. (See Cable's 'tru2way' Play and CES: Roberts Declares Open Season.)

Although cable is promoting tru2way to the hilt, Digeo's original CableCARD-based box tagged for retail did not support that platform. Instead, two-way communications were to be handled by the device's built-in high-speed IP port. However, a "tuning resolver," expected out later this year, will turn inherently one-way CableCARD hosts into two-way devices. (See TiVo à la Mode , CableLabs Spec Brings SDV to the Masses, and 'Tuning Resolver' Faces IP Hurdles .)

— Jeff Baumgartner, Site Editor, Cable Digital News

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