ZENITH'S BILLION-DOLLAR BOX : ELECTRONICS MAKER WINS CONTRACT TO LINK TV, WEB WITH COMPUTERIZED DEVICE.

Byline: Daily News Staff and Wire Services

The line between your television and home computer got more blurred Thursday as Zenith Electronics landed a $1 billion contract to produce TV set-top boxes that provide video on demand, home shopping and World Wide Web browsers.

Zenith's stock jumped nearly 50 percent on the news.

Production of the small computerized devices is slated to start in the first half of 1997. Zenith will sell 3 million of the units to a programming venture between Walt Disney Co. and four telephone companies - Ameritech, BellSouth, GTE and SBC.

The boxes will let people bypass their personal computers and access the Internet through their television. Instead of sitting down in front of a personal computer, the developers hope to entice the public into the living room to use their TV for interactive entertainment.

Officials at Americast, the Los Angeles-based programming consortium of the telephone companies and Disney, would not say which cities will receive the technology first.

``Testing should start around the middle of 1997,'' Americast spokeswoman Jody Miller said. ``Los Angeles County could be an area that is offered the service.''

The boxes, which sort out standard and wireless cable programming, could help to rejuvenate Zenith, which hasn't posted an annual profit since 1988.

The big payday roused investors, who pushed shares of the Glenview, Ill., company up $5.37-1/2 to $16.75 as the most active issue Thursday on the New York Stock Exchange. Zenith's volume was more than 15 times its recent average.

``The investment community says at least they're not dead from the neck up; they're trying to do something good,'' said Robert Gutenstein, an analyst with Kalb, Voorhis & Co. in New York.

The stock had been slipping for months until Thursday's announcement.

The Americast venture is a direct competitor with local cable companies and satellite broadcasters like DirecTV.

Zenith will make the boxes that tune in the channels, but the deal with Americast isn't exclusive for Zenith and is to run out in five years.

The venture puts Americast ahead of rival Tele-TV, an entertainment alliance between a group of other Baby Bells, analysts said.

Tele-TV, a joint venture between Bell Atlantic Corp., Nynex Corp. and Pacific Telesis Group, in June stopped hiring, cut its budget and delayed development of interactive television.

``Bell Atlantic and Nynex are at a disadvantage because they don't have as many partners and dollars to throw at this,'' said Brian Adamik, analyst at the Yankee Group in Boston. In addition, Southern New England Telecommunications Corp., a small phone company serving Connecticut, in June said it would join Americast.

Americast said the set-top boxes it will get from Zenith will be able to carry four kinds of transmissions, including wireless TV and satellite television.

The move fits with Zenith's other product strategies, including its helping to develop high definition television, which plans to use computer technology to deliver sharper pictures than the current analog system.

Making standard TVs is still the major part of Zenith's business, but the company is expending more energy on developing digital TVs and set-top boxes, as well as TVs and cable modems designed for Internet access.

After trouble competing with foreign consumer-electronic makers, Zenith last year sold a controlling stake in the company to South Korean conglomerate LG Group, maker of Goldstar-brand electronics.

The influx of money from its larger partner has helped Zenith become more competitive in developing new technology, analyst Gutenstein said.

``Our approach has been to enhance the entertainment experience of television,'' said Zenith spokesman John I. Taylor.

Zenith believes it will be able to sell digital TVs by 1998. Digital technology offers movie-quality images with CD-quality sound and is more efficient than existing technology, known as analog.

In its standard TVs, Zenith is aiming at the large-screen home-theater market, a fast-growing, more profitable segment. The company announced Thursday it will build a $100 million plant in suburban Chicago to make picture tubes for large-screen TVs.

In early May, Zenith's shares nearly quadrupled in value from their price in late April after the company said it was working with U.S. Robotics Inc. on a cable modem system for high-speed computer access to the Internet.