***An Almost Must Read Article***
One of the elements that cloud the PC demand picture is the emerging
information appliance sector.
Wallstreet are worrying that these appliance might allur potential users away from PC due to low cost and simplicity in usage of these net devices.
What the article below says (Mr. Kanellos' stuff began to make sense lately) is that the free pc or subsidized PC movement may neutralize
the attrativeness of net devices. Therefore, potential users may still stay in PC camp thanks to these great "free pc" deals.
For AMD to rock and roll, a healthy PC market is essential!
Good weekend everyone!
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Net devices face challenge from free PC wave
By Michael Kanellos
Staff Writer, CNET News.com
July 9, 1999, 4:45 p.m. PT
URL: news.com
The recent spate of "free" or subsidized PCs are a hit with customers and another headache for the
nascent "Internet appliance" industry.
With the advent of the subsidized PC, in which consumers get free or discounted computers when
they sign multiyear Internet access contracts, makers of TV set-top boxes and other Net appliances
are being deprived of one of their chief messages: Namely, that their devices constitute a cheaper
way for most consumers to jump online.
"It definitely hurts their proposition, but it doesn't destroy it," said James Staten, an analyst with
Dataquest, who predicted that the free PC movement would impact future Net device sales.
Net device makers, of course, can point to a number of potential advantages their new products
have over standard PCs. TV set-top devices remain much simpler to use and don't require a lengthy
boot-up sequence. Internet service via set-top satellite boxes can also significantly speed up Web
surfing and provide viewing and multimedia experiences ordinary PCs can't.
These devices, say proponents, complement, rather than compete, with desktop PCs. And who says
Net device makers can't cut deals with Internet service providers, just like the PC makers?
Still, the growing subsidized PC movement has reduced the economic advantages and will force
these companies to innovate, cut costs, and rethink some of their more ornate hardware dreams.
"It certainly changes the market for the $700 screen phone," added Sean Kaldor, a consumer
electronics expert from IDC.
A recurring nightmare
In many ways, PCs have become a recurring bad dream for Net device advocates. Every time, it
seems, that devices appear ready to gain currency as simple and inexpensive alternatives to the
lumbering desktop computer, PC prices decline and neutralize the debate.
In 1995, Larry Ellison and other high-level executives began to promote the Network Computer, or
NC, as the cheaper and easier-to-manage successor to the traditional desktop. Just as NCs
appeared to be headed for production in 1997, the sub-$1,000 PC took off.
Consumers were the initial customers for cheap PCs, but price erosion later headed for the business
market. Although price parity wasn't the only problem, NCs flopped in both consumer and business
markets.
One indication of the uphill battle Net device makers face is the relative paucity of venture capital
going into device start-ups. "There are not a lot of people making the venture leap of faith into the
device market," said Steve Jurvetson, managing director of venture capital at Draper Fisher
Jurvetson. "It hasn't been a great category."
Intelligent TV set-top boxes can in some degree be considered the logical successors to network
computers. In fact, one of the leading set-top software providers, Liberate Technologies, is the old
Network Computer, the prime NC advocate.
On a purely dollars-and-sense basis, PC backers have already closed the gap with Net devices. For
instance, under a subsidized deal from Circuit City, consumers pay zero, after rebates, for select
Emachines PCs as long as they agree to sign up for three years of Internet service for $21.95 a
month. For $100, customers can get a printer and a monitor.
By contrast, WebTV boxes, which cannot perform the same panoply of computing functions as a
PC, range from $99 to $199, while standard ISP service ranges from $19.95 to $24.95 a month.
After three years, the full PC in the Circuit City deal, with monitor and printer, costs $207 less.
Cost, however, is not the only consideration. Set-tops, Kaldor notes, are much easier to use than
PCs and can be turned on rapidly.
"The low-cost PC market does eat into the value proposition of the information appliance market,
but for a host of reasons, it shouldn't be significant," he said. "Did the Yugo eat into the motorcycle
market?"
High-speed Internet connections will also serve to enhance the set-top experience. Satellite delivery
costs more than standard ISP service, but it can deliver Web content at a faster rate to homes.
Another benefit: Consumers can improvise their own "interactive TV" experiences, because they can
switch from TV programming to Internet viewing fairly rapidly.
A number of companies, including WebTV, are in the process of rolling out such services, which will
also include "digital VCR" capabilities that will allow users to record and store movies.
Convergence or distinct markets?
Paul Liao, Panasonic's chief technology officer and president of Panasonic Technology, said that
ultimately, the market for PCs and TV-centric entertainment devices like set-top converters or game
consoles will not converge or impinge much on each other, even though both are increasingly
intertwined through common technology such as hard disk drives and Internet connections.
"I don't think you're seeing a convergence of the markets. The market represented by the family
room is not merging with the market of the office and home office. Nobody really wants to run an
Excel spreadsheet on their TV," Liao said. Likewise, nobody talks about watching a PC, he said.
But costs and technology remain an issue for these fancier access services, said Staten. To get
Internet via satellites, consumers have to buy a dish, and the monthly service package costs more.
Satellite providers also have yet to work out all of the kinks in their technology, which can hamper or
limit Internet use. Cable service remains subject to geography.
There is also the multiple-access issue. A number of families already have PCs hooked to the
Internet. Are they really going to want to invest in a second device and subscribe to additional
monthly services? Likewise, will new users be drawn to PCs, which are promoted as business tools
and education aids, or a box designed largely for entertainment? WebTV, for instance, currently only
has around 800,000 subscribers, Kaldor points out.
In the face of PC popularity, Net devices increasingly may have to become home servers, predicted
Staten, a device that can also provide Internet connections to other appliances or link up various
machines. |
