Network Computers Help Push Down PC Prices
Hanover, Germany, March 18 (Bloomberg) -- Network computers
were billed as a way to lower the cost of computing. They may
have succeeded, though not in the way proponents intended.
Network computers, inexpensive terminals that rely on a
network such as the Internet for programs and data storage,
haven't yet lived up to promises they would supplant self-
contained personal computers. PC shipments are expected to rise
13.4 percent this year, research company IDC Japan Ltd. says.
Even so, analysts say the debate about network computers, or
''NCs,'' helped force computer makers to build cheaper and more
easily managed machines. The result will be on display this week
at the Cebit technology fair in Hanover, where companies from 60
countries are showcasing their latest products.
''The NC has been more evolutionary than revolutionary,''
said Rainer Mauth, senior editor of computer industry magazine
Byte. ''The PC will remain the main platform, but PC makers are
adapting the idea to reshape computer architecture.''
Advocates of network computers say they are cheaper to
maintain and upgrade because all software applications sit on a
central computer. The so-called server may provide software and
data to thousands of network computers via the Internet or some
other network. On a PC, the applications are stored locally on a
disk.
Consisting of little more than a terminal, modem, and
keyboard, a network computer can keep the cost of computer
hardware below $1,000. Yet many analysts say they're not
convinced the long-term benefits justify the initial investment
in the central computers needed to feed the network computers.
Users Like PCs
What's more, businesses may have a hard time convincing
users that information will be as secure stored on a central
computer than it would be on a hard drive, analysts say.
''The management information systems department may prefer
it for a better control environment,'' said Chris Jones, an
analyst at market researcher Dataquest, ''but users don't.''
Though a number of computer makers, including International
Business Machines Corp. and Sun Microsystems Inc., have
introduced versions of the network computer, Dataquest's Jones
said the move is driven primarily by a need to keep up with
rivals.
''PC manufacturers have been kind of forced into this and
none of what they've done will really take the market by storm,''
Jones said.
Sun Microsystems Inc., one of the principal backers of the
network computer idea over the last two years, won't even ship
its JavaStation network computer until later this year.
'Thin Clients'
Still, the move toward lower-cost computing is gathering
speed. Microsoft Corp. has released a test version of software
that lets low-cost personal computer terminals run applications
written for full-price PCs. These low-cost computers, known as
''thin clients'' because of their limited storage and memory,
sell for as little as $500 -- in direct competition with network
computers.
Intel Corp., the world's largest computer chipmaker, is
planning to introduce a low-cost chip in April for machines under
$1,000, and is teaming with Network Computing Devices Inc. to
produce a low-cost ''thin client'' PC.
This kind of response to the NC, industry experts say, has
robbed the device of one of its biggest advantages--providing PC-
type capability for under $1000.
''Its selling point was delivering a product for under
$1,000, but now that you can get a good PC for under $1,000
there's no need,'' said Robert Scott-Moncrieff, director of
marketing and communications at Olivetti Computers Worldwide. He
says the Italian computer maker has developed a prototype NC,
yet there hasn't been enough interest to market it.
Database Use
The NC could succeed single-function computers that access a
single database, Dataquest's Jones said. Such computers, used by
bank tellers for example, account for about 10 percent of the
market.
''Given that Europe has a PC market of 19 million units,
we're talking small numbers,'' Jones said.
Others are more optimistic. Research group Frost & Sullivan
expects the network computer market to grow fourfold to $2.7
billion over the next seven years. A study by U.S. research group
International Data Corp. predicts NCs will capture 17 percent
share of Western Europe's corporate market by 2001, up from 3
percent in 1998.
IDC counts hand-held computers, set-top boxes, and game
consoles -- which all are expected to offer Internet access in
the future -- among NCs.
Though network computers have been slow to take off, Byte
magazine's Mauth said he's confident they'll catch on. As
computer makers' response to the network computer debate shows,
he said, ''The idea makes a lot of sense.''
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