BIOS maker Phoenix reinvents itself as virtualization vendor

Venerable behind-the-scenes firm makes a move on next-gen functionality

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Over the past quarter-century, more than a billion PCs have been produced that use Basic Input/Output System (BIOS) software from Phoenix Technologies Ltd. The BIOS provides a key interface between the hardware and the Windows operating system.

But with the BIOS business in a long-term decline, Phoenix is aiming for a rebirth as a vendor of technology that, instead of enabling Windows, starts to compete with it.

On Monday, the Milpitas, Calif.-based vendor unveiled a Linux-based virtualization platform called HyperSpace.

Based on the HyperCore hypervisor developed by Phoenix and embedded within its popular BIOS, HyperSpace provides a thin software layer upon which cut-down versions of popular open-source software can be loaded instantly without the need to boot up Windows, said Phoenix CEO Woody Hobbs in a telephone interview.

"We call this embedded simplicity, or PC 3.0," Hobbs said. The goal is to allow faster access to applications such as Web browsers, e-mail programs or video players on notebooks running Windows.

Such quick-launch capability is common in smart devices such as handheld devices or smart phones, and some ultramobile devices offer similar functionality with features such as AVN Now. But PCs that now run Windows must either go through a lengthy boot process or wake up from standby mode -- still a hiccuping feature in many laptops.

Be kind to batteries

Users can easily toggle among applications running in Windows and those in HyperSpace. The difference is that applications running in HyperSpace consume fewer system resources -- and, hence, battery power -- than those running under Windows, said Hobbs.

"Windows is quite consumptive of batteries," Hobbs said, citing complaints about Vista's power management. "So the more you can stay out of Windows, the more you can extend your battery life."

HyperSpace also delivers a more locked-down system than Windows, says Hobbs, who argued that secrecy will improve security.

"By putting software in a completely unpublished environment, you'll be able to eliminate the blue pills and rootkits," he said.

Keep the customer satisfied (and profitable)

Laptop PC makers are Phoenix's target market, said Hobbs. For them, HyperSpace provides a new way to differentiate their hardware and build new revenue-generating services. For instance, a laptop vendor could use HyperSpace to create a customized laptop with applications and services aimed at certain industries or occupations -- salespeople or marketers, for example.

Or, he said, HyperSpace could deliver subscription-based access to antivirus or security software, such as Phoenix's own FailSafe technology. FailSafe can be used to track or kill lost or stolen laptops the next time they reappear on a network. Phoenix claims that because the FailSafe is based in the BIOS rather than Windows, it is harder for thieves or hackers to tamper with or turn off.

It's a case of adapt or die, or at least suffer the slings and arrows of ever-thinner margins. "[Laptop makers] have no choice. They only see the price of a regular PC getting cheaper. Meanwhile, they see the mobile carriers all making tons of money," he said.

All told, HyperSpace should enable PC makers to increase their revenue per PC by an average of $100, according to Hobbs.

Rob Enderle, a PC analyst based in San Jose, said he thinks the strategy is sound.

Phoenix "was all over the map for the last couple of years. They're actually playing smart now," he said. But Enderle advised Phoenix to market HyperSpace heavily to business IT managers in order to stoke demand among its actual customers, the PC makers.

"You need to get a laptop buyer, a CIO, to ask Dell, HP or Lenovo for HyperSpace for it to stick," he said.

Hobbs said Phoenix is already working with some PC makers on HyperSpace, though he declined to name them. He said HyperSpace-enabled laptops could appear as early as the second quarter of next year.

Under the hood

HyperSpace is a radical departure from traditional BIOS software from Phoenix and the other leading player, Norcross, Ga.-based American Megatrends Inc. That software offers only a handful of utility applications to help users diagnose and fix problems if, for example, Windows is corrupted and the PC has trouble booting.

While applications running under BIOS are most noteworthy for their texty, pre-Windows look, Hobbs promised that applications running in HyperSpace will have a rich graphics look.

"We are not taking you back to DOS," he said.

Another technical concern is the semi-closed nature of Hyperspace. For instance, end users won't be able to easily add or uninstall software from HyperSpace. That means they must rely on Phoenix creating a worthy ecosystem of open-source software providers willing to port cut-down versions of their applications that can run nimbly under HyperSpace.

Hobbs downplayed that, saying Phoenix has no illusions about trying to match Windows' massive ecosystem.

"We don't want a thousand partners -- just 20 to 30 good ones," Hobbs said. Phoenix is also looking to partner with a company such as Google Inc. or Yahoo Inc. in offering an ecosystem of "widgets" -- small software programs run inside a Web browser.

Mammals and dinosaurs

Phoenix's chief potential obstacles appear to be market-related. In particular, the company must contend with the two members of the Wintel duopoly: Microsoft Corp. and Intel Corp. They have traditionally called the shots and relegated Phoenix, despite its history as a player in the PC business that dates back to the early 1980s, to playing only a supporting role.

Phoenix 1 for 2 so far, because it appears to have won Intel's support.

Intel is pleased to see Phoenix embracing Intels technologies to deliver innovative products for PC clients," said Gregory Bryant, vice president and general manager at Intels Digital Office Platform Division, in a statement released by Phoenix.

Microsoft is another matter.

"We're just trying to stay out of their way," Hobbs said. "Right now, we are not a visible threat. They have to prioritize Google way ahead of us."

At the same time, Hobbs wasn't shy about proclaiming that Microsoft's never-ending quest to add new features to Windows was a doomed one.

Hobbs said that Microsoft "is going down a failed path. They're just putting too much on the back of Windows, which the architecture can't support."

And, he said, Microsoft's attempt to get around the problem of Windows' sluggishness -- a new technology for Vista called SideShow -- doesn't work as well as HyperSpace.

Using SideShow, laptop makers can display information from Vista applications or miniature applications called "gadgets" on a small screen embedded on the outside of a notebook computer case. A user might use a gadget to glance at his in-box or check the latest weather forecast without opening up and turning on their notebook PC.

But Hobbs pointed out that information displayed by SideShow is static and is only as current as the last time the user ran Windows.

"That's not very useful. It's trying to get around problems inherent in Windows that HyperSpace doesn't have," he said.

HyperSpace also competes with virtualization software providers such as VMware Inc., though Hobbs stressed that the two vendors target very different markets (PC makers versus business IT) and have different technical approaches.

"VMware is building 18-wheelers; we're just building a little motor scooter," he said.

The end of BIOS (is not imminent)

Late last month, Phoenix reported that had cut its fiscal 2007 net loss by almost two-thirds from the prior year to $16.4 million.

Revenue was $47 million, down from $60.5 million in the prior year. Virtually all of that came from Phoenix's licensing of BIOS for 125 million PCs last year.

But that business remains under long-term threat, due to a follow-on replacement standard called Unified Extensible Firmware Interface (UEFI). UEFI offers more advanced features than BIOS and lets computers run cooler.

All of the Intel-based iMacs from Apple Inc. use UEFI, as will Windows Server 2008 and Vista SP1 on 64-bit systems, according to Michael Krau, chairman of the Industry Communications Working Group that oversees the UEFI standard.

Still, only 12.5 million PCs shipped last year with UEFI, Krau said. Moreover, all of those were still compatible with BIOS.

Which is why Hobbs asserts that the company has plenty of time to develop HyperSpace as its BIOS business slowly winds down.

"We have a lot of customers who will be staying in the old world for quite a long time," he said.

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