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Summary:

Years ago, Stephen Dukker helped to disrupt the personal computing industry when the company he founded, eMachines, started selling PCs for $400 each, effectively broadening the number of consumers who were able to buy computers. And now he’s trying to do it again, as CEO of […]

Years ago, Stephen Dukker helped to disrupt the personal computing industry when the company he founded, eMachines, started selling PCs for $400 each, effectively broadening the number of consumers who were able to buy computers. And now he’s trying to do it again, as CEO of Redwood City, Calif.-based virtualization startup NComputing, which just raised $28 million in a second round of funding.

NComputing makes terminals bundled with a keyboard, mouse and monitor that can be hooked up to a PC (given the processing power available in today’s computers compared with what’s needed for most applications, multiple terminal kits can be connected to a single PC.) After selling some 600,000 kits primarily to educational users over the past year-and-a-half, NComputing will take the $28 million it just raised (at a more than $100 million valuation) and use to target the enterprise market.

I spoke with Dukker about the importance of opening up new markets for PCs, and how that can be done using software. We also talked about NComputing’s push into the enterprise market, even as it continues to find success in education and the developing world. Currently the company sells 80 percent of its terminals to educational buyers, with 50 percent of its sales occurring in the U.S.

Q: Why would someone want to get into the PC industry today?

A: At eMachines we proved there is no low-cost PC that allows their suppliers to be profitable. Since the industry has not been able to bring prices down further, we have not been able to open up new markets. So all a PC maker can do to gain market share is to sell at low margins and steal share from other people.

Q: So why did you come back to the PC world?

A: After eMachines, I thought I was through with PCs, and then I got a call from my No. 2 guy at eMachines who was in Germany working with these guys who said they could lower the cost of PC ownership with software. I told him if you can do this, you can potentially change the world. The cost of the PC basically goes away. The chip costs $2 to produce, but the software is hard to do. It’s exactly what companies like VMware, Citrix and Microsoft are doing with desktop virtualization.

Q: What made the software so compelling?

A: With the PC what we have is a classic situation of the exhaustion of an architecture. PCs are becoming supercomputers and the applications are not keeping up. Unless you are doing some super science or are a hard-core gamer, you don’t need the processing power. With our software and hardware you can run a couple of terminals on one computer for about $70 per kit. It costs us about $11 to make the kit. This allows us to charge the customer less and make more at the same time, which is the hallmark of a disruptive technology.

Q: Why go after emerging markets first?

A: We gain credibility. By engaging enterprise customers later we will have more than 1 million people using our machines around the world. I want to further emphasize that this technology was not designed for emerging markets and education. It was originally designed to be a Citrix killer — the most efficient and cost-effective server-based computing solution for the enterprise. The reason we’re seeing the huge response in the education and emerging market is because their needs are immediate, whereas we know the enterprise markets are fairly slow.

Q: Where will you take this next?

A: We accepted the money to pick up the pace on the enterprise side without losing focus on our current markets. We are in trials in many large enterprise environments, and will make a meaningful impact on the Citrix and VMwares of the world in the back half of this year. We are also going to introduce a new product for broadband providers where you could have our chip inside a set-top box. It will be a desktop that’s being served to you for a couple bucks a month over your television by a broadband provider.

  1. I can’t believe that they got an extra 28m funding when you can’t implement what they sell without breaking MS’s EULA for XP….??

    Read NComputings own comments regarding licensing – you are responsible, not them

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  2. Dave, I don’t see any difference on EULA that Apple’s bootcamp, VMware fusion, Parallel offer to end user. They all let end user to be responsible to install and use more license. NComputing only does enabling to share powerful PC to more people. SW license is in grey zone that all industries should do better job for end user. See how many times Microsoft EULA was changed since 2001? million times!!

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  3. Jesse Kopelman Tuesday, January 15, 2008

    I really wish Dukker would acquire the rights to the DEC logo and brand their nuevo dumb-terminals as such. It would be a nice blast from the past for those of us over 30.

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  4. How on earth does this ‘take on VMware’?

    All they do is allow multiple people to log into the same machine, which actually violates Microsoft licensing!!!

    I think Ncomputing had a cool idea, basically hardware initiated KVM over IP… but that’s not application sharing (citrix) virtual hosted desktops (vmware), with possibly application virtualization in the not so near future.

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  5. [...] Comment on NComputing Raises $28M to Take on VMware by Paul FisherI think Ncomputing had a cool idea, basically hardware initiated KVM over IPâ?¦ but thatâ??s not application sharing (citrix) virtual hosted desktops (vmware), with possibly application virtualization in the not so near future. [...]

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  6. [...] Comment on NComputing Raises $28M to Take on VMware by Paul FisherI think Ncomputing had a cool idea, basically hardware initiated KVM over IPâ?¦ but thatâ??s not application sharing (citrix) virtual hosted desktops (vmware), with possibly application virtualization in the not so near future. [...]

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  7. The one thing that you guys are missing that really makes this special is that NComputing’s X300 is the “Greenest Computer Product in the World”. All the other existing technologies can’t touch its <1 watt of power consumption of the X300. This is greater than 95% savings over a PC. Do you know what the equates to? If a client deploys only 100 X300 it is equivalant to the power that a 40kilowatt Solar Panel produces in a year!!! So for every 100 X300′s in use its like installing a 40 Kilowatt Solar Panal. By the way a 40 Kilowatt solar panel cost about $150,000. A 100 X300′s cost about $20,000. And students can use the X300′s. The Solar Panel just set on a roof and looks pretty.

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  8. It is also probably the best e-waste solution on (and for) the planet. Copmapred to about 20 lbs per pc thrown out every 5 years or so, you might toss one of these devices every 7 to 10 years and each one is only about a third of a pound.

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  9. Great technically and environmentally…. aimed at wrong market!

    Their best market is the home/casual user via ISPs (or cable). Most home users simply surf the web… so the ISP can provide boxes that work through servers (Linux would be best and free)… the home users doesn’t even have to buy a computer!

    Throw in TV with the service, and the user can use the same screen for computing and TV needs.

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  10. Use them at home on the LCD, great low cost way to implement computer access in the whole house.

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