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Alternatives to a PC

"Information appliances'' may not be as complex as personal computer, but they are limited in function and sometimes nearly as pricey as a low-cost PC.

By DAVE GUSSOW

© St. Petersburg Times, published November 13, 2000


It's not a pitch one expects from Microsoft: Surf the Internet "without a computer, without complications, without a lot of cash."

Could this really be coming from the software giant that dominates the personal computing world? From the company that's so often criticized for the complexity of its products and blamed for keeping costs up?

Meet the MSN Companion, a device whose ads seem aimed at people who who have not yet jumped on the PC and Internet bandwagon but who are interested in surfing and e-mail.

It's one of many gadgets, called "information appliances," being rolled out by some of the top names in the high-tech industry -- America Online, Intel Corp., Oracle Corp. and Microsoft -- as well as some lesser-known companies, such as Netpliance, Cidco, and infoGear.

The appliances, priced from $100 to $600, offer a simplicity of setup and use that evades personal computers. But they also have limited functions, usually can't be upgraded and can lock users into long-term contracts for Internet access that can make the costs higher than they first appear.

International Data Corp. predicts that within four years the market for home Internet appliances will go from almost nothing to about 6.5-million units. And that's not including Internet-ready devices such as cell phones and personal digital assistants.

Opinions vary on whether consumers will jump at these devices. In addition to questions about whether these devices are good deals, some analysts suggest the market won't attract novices.

"There's a misconception out there that these devices are going to be the way for non-PC, non-Internet homes to get connected," said P.J. McNealy, a senior analyst with the Gartner Group research company. "These are going to be ancillary devices to already wired households."

McNealy says one way to look at such devices is as replacements for magnets on refrigerator doors: good for family calendars, e-mail notes, quick updates for weather, news and traffic. "It takes it out of the room that has the PC to any room in the house," McNealy said.

While some experts don't see these appliances affecting PC sales, the companies offering the machines are confident the market is there.

"I think Internet appliances will outsell PCs in three years," said Gina Smith, chief executive of the New Internet Computer Co. (www.thinknic.com). But, she said, "PCs are here to stay."

Backed by billionaire Larry Ellison of Oracle Corp., New Internet Computer Co. has an ambitious sales goal for its machine: 5-million units by August, its first anniversary. Smith touts features on the NIC that she thinks gives it an advantage over competitors:

The price ($199.99, or $329.98 with a 15-inch monitor) of the machine is the only cost its customers have to pay. Consumers can use any Internet service provider, and NIC even suggests NetZero, a free service. The machine has Universal Serial Bus ports to hook up devices and an Ethernet card for a network.

What the NIC doesn't have is a hard drive, unless users add one. Like early personal computers, it can't remember a thing from one day to another. Its Linux operating system runs off a CD-ROM. And while the browser will keep bookmarks of favorite sites, users will need to use Web-based services to store other things.

But setting up the machine is a snap. Plug in the keyboard, mouse, phone line, monitor and power and it's ready. Signing up for NetZero takes some time, but from box to surfing took about 30 minutes. The NIC can handle audio, video and any plug-ins for multimedia sites.

Ease of use and reliability are important to Smith, a 1985 Florida State University graduate who worked as a technology reporter for ABC-TV and a number of PC magazines, as well as having a syndicated column and radio show. She covered Ellison, who offered her the job leading the company last year because of her background as a tech consumer advocate.

"This is his dream," Smith said of Ellison, whose first attempt for a network computer linked to the Internet flopped in the mid-1990s. "Larry wants to go down (in history) as the father of Internet computing."

NIC's target market includes people who have purchased PCs and don't want to spend big bucks on another machine but want an additional gadget for access; schools, where the less expensive machines can get more kids online (Ellison is donating $100-million to this effort); and businesses, such as hotel chains, that can offer customers Internet access.

Smith said she welcomes competition from others, even the big-name companies. The more gadgets out there, she says, the more comfortable consumers will become with the idea and the bigger the consumer base will be.

NIC has plenty of competition, some from offers that merit a careful reading of the fine print.

For example, the MSN Companion (www.msn.com) had a recent promotion for $359, which included the machine and a one-year contract for Internet access from MSN, Microsoft's online service, the only one it works with.

The i-opener from Netpliance (www.netpliance.com) costs $299, including a 10-inch LCD screen. But it, too, works only with the i-opener Internet service. One year paid in advance costs $250.

Compaq Computer's iPAQ lists for $599, but pushes a $400 rebate for a three-year contract with MSN at $21.95 a month (about $790), bringing the total cost to almost $1,000. And consumers who break the contract face penalties.

Some companies are going for even more of a niche market. Cidco's MailStation (www.cidco.com) is a $99 machine that handles e-mail and offers limited headline news and other information from Yahoo for about $10 a month. One limit here: The e-mails have to be text. If you want to share photos, or even some text attachments, it won't work.

Interestingly, the Gartner Group sees three video game systems as potential candidates to be labeled information appliances: Sega's Dreamcast and Sony's PlayStation 2, both available now, and Microsoft's X-box, expected next year. The Dreamcast and PlayStation 2 have computerlike capabilities and will have Web access capabilities as well, as will the X-Box.

McNealy, the Gartner analyst, said it's too early to determine which devices will be winners over the long haul, but the company is dubious about some of the deals. "We're seeing some things we really don't think will work," McNealy said. "We think any device that comes with a service contract is going to have its challenges."

In addition to contract costs, McNealy said it will be a market sensitive to price. If gadgets get into the $500 or $600 range, it doesn't cost much more to get a PC with more functions and power.

"Prices are high, service contracts haven't been figured out, and there's consumer confusion," he said.

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