The market for PC-like set-top boxes continued to erode this week when Microsoft eliminated the Ultimate TV division and sent many of the division's members scurrying to find new jobs. Ultimate TV, a digital video recorder (DVR) and satellite TV receiver device, never really caught on with consumers, although Microsoft says it is still committed to the market. Similar devices such as Replay, TiVo, and Web TV have also failed to make much market headway.

"The market has been relatively slow in the uptake of these set-top boxes, but we're not leaving that market by any means," a Microsoft spokesperson said. "Our commitment to TV is still strong."

The division's 500 employees (based in Microsoft's Mountain View, California, campus) are being reassigned; 168 employees face layoffs unless they can find work in other parts of the company. However, the Ultimate TV hardware group is joining the Xbox team, the Ultimate TV services group is moving to the MSN TV Services Division, and the Ultimate TV software group is moving to the Microsoft TV Division.

Ultimate TV reportedly attracted fewer than 50,000 subscribers, probably because it focused solely on DirecTV satellite service rather than the wider cable TV market. At the Consumer Electronics Show (CES) earlier this month, Microsoft representatives told me that satellite TV is more aggressive about rolling out new technology and thus made a better candidate for the company's initial release. In the year since Microsoft released Ultimate TV, however, the company was unable to secure any cable contracts, which could have dramatically increased its installed base.