Waiting for a phoenix: How Ricochet could be resurrected

Earlier this year I wrote about the serious financial troubles that high-speed wireless service provider Metricom was having. Today, the company is toast, and its Ricochet service no longer functions. Last week, the company’s assets went up for auction. We’ll find out who won them on Friday.

Is this the end of the line for Ricochet, the service that delivered 128kbps wireless Internet access in 13 major markets? Don’t bet on it.

Today’s bust economy is a huge opportunity for parties that still have comfortable amounts of cash. They can buy corporate assets at a huge discount and restart the businesses with a clean slate, while investors in the original companies that developed the assets absorb the loss. I expect that to happen with Metricom.

Remember Iridium, the network of 66 geosynchronous satellites designed to bring mobile phone service to every corner of the Earth? It’s the poster child for what I call “value revitalization”–the corporate analog of value investing. Launched in November 1998 with great promise, the project racked up $5 billion in expenses and garnered fewer than 65,000 customers by the time it shut down last year. At the last minute, a group of investors bought the old company’s assets for $25 million–peanuts for an infrastructure of Iridium’s scope. True, its $7 million monthly operating expenses to keep the satellites in orbit is a hefty chunk of change, but without the need to pay back the initial hardware investment, the new company has a much better chance of success.

The same process happens across the United States every day, though few ventures are as spectacularly profligate as Iridium, and most therefore tend not to get as much press. But second owners making a success of businesses in which they didn’t have to invest heavily is becoming a road to riches–or at least a pathway to profitability–nowadays.

In such cases, management skills are the most important predictors of success. Consider that Metricom’s monthly cost of service revenues was twice that of Iridium’s, according to its last quarterly report to the SEC. That seems high for a company whose assets, unlike its expenditures, were not in orbit. Yet the company had only about $1 million in revenues a month. The new management must cut expenses aggressively, while at the same time boosting marketing efforts. One tried-and-true marketing technique employed successfully by mobile telecom providers for years is to give away the hardware (phones and pagers, or in Metricom’s case, wireless network adapters) and lock in long-term charges for the services.

To spread out its risk and speed its time to market, the new management should partner with technical organizations in cities where it doesn’t already have a presence. In return for help installing and maintaining the infrastructure, these companies could get a piece of the company and a designated portion of the revenue in their service areas. The more quickly Ricochet becomes universal, the better chance the company has to take advantage of the benefits that come with being the first player in a niche. (Though, of course, that’s not always a guarantee, either. Just ask Netscape and CompuServe.)

Everybody I know who tried Ricochet loved it, and folks like me who couldn’t try it because it wasn’t available in their market lusted after it. Pent-up demand like that augurs well for a Ricochet revival.

I’m talking as if a bargain-basement buyout is a done deal, when in fact I know no such thing. But it stands to reason Metricom’s ashes could birth a bright new company for a savvy organization at the right price.

Remembrance of PCs past–Lee’s classic PC time regained

I was sitting at my desk this morning, dipping a madeleine into my tea, when a headline in a trade paper caught my eye: “The PC: 20 years old this week.” In an instant I was transported back 20 years, captive to memories returning in excruciating detail.

When the IBM PC came out 20 years ago, I was just beginning my first IT job, programming in COBOL on IBM 370 clones. A few months before, I remember talking with colleagues in my college computer department about the prospect for personal computers. We were dubious about their worth, but interested in trying one out to see what the hype was about.

I managed to evade using a PC for about five years. My first microcomputer experience was with Lotus 1-2-3 on a PC XT with a 20MB hard drive–hot stuff at the time. I learned XyWrite to do word processing, since I was employed at a newspaper that used the related Atex page publishing system.

Once I’d walked down Swann’s Way with a company computer, I wanted one for myself. The main criterion for me was portability. I wanted to be able to carry my PC with me as I studied for a master’s degree. I shelled out about $1,000 for a Datavue Spark–at 9 pounds, the lightest “laptop” of its time. I was quite pleased with it for about two weeks, when Datavue announced a model that had a fixed disk drive. My poor baby had only two diskette drives.

Still, it was good enough to do all the word processing and communications I needed to do. I used it to join CompuServe and browse bulletin-board systems–the Internet equivalents of the day.

Within a couple of years, I’d upgraded to a desktop system–a 33MHz 486DX with a whopping 8MB of memory and a 200MB hard drive. It cost about $2,400. I kept that computer going for about seven years, upgrading the motherboard, processor, memory, disk drive, even the power supply, until nothing was left of the original except the case. Somewhere along the way, I donated the Spark to one of the movers that helped my family move–the sweet cheat gone.

Eventually the desktop system, too, was relegated to the basement in favor of newer technology. Its replacement still lives in my home office. But it wasn’t until recently that I found the computer to which I’ve given my heart, as in a budding grove.

Remember my earlier desire for portability? I’ve been carrying around a Sony VAIO PictureBook PCG-C1VN lately. It’s tiny–the size and weight of a hardback book–but with all the power of a larger machine. The screen is only half as tall as a normal notebook screen, but I can live with that. It uses a 600MHz Transmeta Crusoe processor, so battery life is supposed to be extended, but I haven’t taken any trips to distant cities on a plane, so I stay near an electrical outlet. I used V Communications’ excellent PC Upgrade Commander to port all the files and applications from my desktop PC to the notebook.

Because Sony has introduced a newer model, the faster PCG-C1VP, you can get it as cheap as $1,349–an outstanding deal. I carry mine everywhere nowadays. I look at its utility as time regained.

What happens when hard-drive technology hits its size limit?

Nowadays, new desktop PCs typically come with 20GB to 40GB of hard drive space. That’s plenty for most people today. But the increasing popularity of digital sound and video is likely to make storage needs grow.

Most desktop PCs use IDE (Integrated Drive Electronics) disks that follow the ANSI T13 committee’s AT Attachment (ATA) spec. The latest version of ATA specifies a maximum of 28 bits for addressing the logical blocks of the cylinders, heads, and sectors that make up the organizational hierarchy of a hard drive. That’s 2²⁸ sector addresses. Multiply that large number by the 512 bytes in a sector, and you discover that the maximum size for an ATA hard drive is 137GB.

A drive of 137GB may seem large, but historically, the largest drives have been about six times the size of the average drives sold. That means we’re about to come up against the limits of ATA technology.

What will happen when manufacturers hit the limit? Not much. Workarounds have been around for a long time in the form of redundant arrays of inexpensive disks (RAID). If you prefer a single drive, you can already purchase SCSI drives that exceed 137GB.

ATA drive manufacturers are not unaware of the impending capacity ceiling. They’ve pushed the T13 committee into drafting a new version of the ATA spec, ATA-6, which raises the number of address bits from 28 to 48. That would increase the maximum capacity of an ATA drive to about 144 petabytes.

What’s a petabyte? Just as a gigabyte is 1,000 megabytes or 1,000,000 kilobytes, a petabyte is 1,000 terabytes, or 1,000,000 gigabytes. That’s a lot of bytes. By the way, after petabytes come exabytes (and you wondered where the tape drive company got its name), zettabytes, and yottabytes. A yottabyte is a million billion gigabytes.

Though the standard is not quite final, disk manufacturers are poised to turn out products that comply with it when the time comes. You can expect to see ATA-6 hard drives on the market by the end of the year.

A capacity limit of 144 petabytes ought to be enough to satisfy hard drive makers for a good long time. Unfortunately, it won’t be the last disk bottleneck. Because most modern operating systems, including all flavors of Windows through Windows XP, use 32-bit addressing, they won’t be able to address more than 2³² bytes, or 2.2 terabytes, of storage on a single disk, even though a disk itself may be capable of storing more than that. While that number sounds outrageously high now, remember that just three years ago an 8GB drive was a massive unit. It should be interesting to see the state of storage in 2004.