Ready or Not, Here Come Net Appliances

NEW YORK (06/28/2000) - Watch out: The technology world is about to bring you another electronic "must have" that you don't need.

Here at PC Expo, everyone from Intel Corp. and IBM Corp. to software firms such as Be Inc. are whetting the gadget-happy appetite of show attendees with a bevy of screen phones, Web pads, and simple Web-browsing machines.

These hybrid gizmos share a goal: easy access to the Web, e-mail, and digital music for computerphobes who may be receptive to using simple, friendly devices rather than sophisticated PCs. But for the moment, the ones looking are the PC-savvy folk who don't need the simplicity; and the target customers are still a few steps back.

But even Big Blue wants such a device on its roster. On Tuesday, IBM partnered with BellSouth to offer customers an all-in-one NetVista Internet appliance, sans hard drive, starting next month.

This fall expect even more from Microsoft Corp., America Online Inc., and dozens of smaller firms, all trying to convince you that you (or your parents) need one of these devices.

Destined for kitchens and family rooms, these new digital appliances will join a scant number of Net-ready gizmos already available today. So far, Net appliance sales have been weak, but pundits say consumer attitudes are slowly changing and over the next two years simple Web-surfing gadgets will evolve from geeky toys to ubiquitous mainstream devices.

Here are the highlights of some of the gizmos on display this week that are available now or slated to hit stores soon.

Simple Surfing

Intel made the biggest splash in the surf-the-Web-with-ease department with its Dot.Station. This countertop terminal marks Intel's first plunge into the increasingly crowded pool of Web-surfing Internet appliances.

It looks more like a portable color TV with keyboard than a PC. But it lets you surf the Web using a standard dial-up Internet connection, collect e-mail, and even talk on the phone with a handset located on the top of the device.

Intel will not sell the Dot.Station in stores. Instead the company will sell it in volume to Web portals, banks, telecommunications companies, and Internet service providers, which in turn will offer it bundled with service to customers, says Craig Miller, Intel's director of marketing and business development.

Intel has already inked deals with a number of large unnamed telecommunications companies and has sold an impressive half-million Dot.Stations destined to be rebranded and marketed this year, Miller says.

IBM Wants You to Surf the Blue Waves

Big Blue is making its mark with a jet-black all-in-one Internet appliance, complete with a 10-inch screen and teeny-weenie tabletop footprint. It will be specially jiggered to work exclusively with BellSouth so the telephone giant can pipe to customers such value-added services as caller ID, unified messaging, and bill presentation. And as long as you pay your phone bill, you'll be able to surf any Web site on the Net.

The device itself comes with a notebook-size, limited-function keyboard with a trackball mouse in the upper right-hand corner. IBM will make and sell the devices and will help BellSouth manage the complicated network required to deliver applications, services, and of course advertisements to appliance owners.

Be Finds a New Niche

The software firm Be showed off a Web pad and a Compaq Computer Corp.-branded Internet appliance running its new BeIA operating system. The Compaq device, code-named Clipper, has been around for a while; but Be's software is new.

Instead of struggling to sell its operating system in the shadow of Microsoft, Be says it's now focusing on the blossoming world of Internet and entertainment appliances. Its latest Web-centric operating system can be tailored for any device and supports standard third-party Web browser plug-ins.

For example, the Compaq Clipper can surf any Web page and runs Sun Microsystems Inc.'s Java virtual machine. That allows you to use so-called Web-top software applications like word-processing programs from a remote application service provider, using the Clipper. While Be stresses it can't speak for Compaq, representatives guess the Clipper may be available sometime this fall.

The Net Appliance Oracle Speaks

Although Oracle Corp. isn't here at PC Expo, the Oracle-backed New Internet Computer is another new face on the Internet appliance block. This month, the company begins selling a NIC aimed at non-PC owners, and it projects 5 million units in first-year sales. The NIC costs $376--which includes a standard PC monitor--and lets you browse the Web, e-mail, but not much more.

Uphill Battle

Expect plenty of early flops, says Tim Bajarin, Internet appliance expert with consulting firm Creative Strategies. One or two Internet appliance firms will stumble onto just the right mix of utility and entertainment--although it's thus far elusive, he says.

"Today Internet appliances are of little interest to average consumers," echoes Paul O'Donovan, a Dataquest Inc. analyst. But that won't stop appliance pushers from making valiant efforts to market and sell devices, or, at least, die trying.

Internet devices face major obstacles in the short term, including a lack of consumer awareness. Haunting developers is the high cost of key components such as monitor screens, a lack of device-specific services, and fuzzy after-sale strategies for making money.

"We are building a whole new infrastructure for these devices," says Brian J.

Conners, vice president of the Net Device Alliances group within IBM's Personal Systems Group. Until the complicated, behind-the-scenes business arrangements are brokered, few Internet appliance companies will find it feasible to sell expensive devices. Today few firms have figured out successful ways to recoup hardware costs through ads, electronic commerce, or customer loyalty.

However, many pundits say the long-term outlook for Internet appliances appears rosy.

Internet appliances, including TV set-top boxes, handheld computers, and gaming consoles, are expected to grow from 11 million units shipped in 1999 to 89 million units in 2004, according to research firm International Data Corp. The market will grow from $2.4 billion last year to $17.8 billion in 2004, IDC predicts.

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