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InternetNews.com: Intel Offers ISPs New Web Appliance

Jun 22, 2000, 13:46 (0 Talkback[s])
(Other stories by Patricia Fusco)

By Patricia Fusco, InternetNews.com

Stepping out of its core chip-making business, Intel Corp. Thursday unveiled its first integrated Web appliance.

The handheld device, dubbed Intel Dot.Station, features a built-in phone and Internet access with e-mail and Web browsing capabilities.

Intel (NASDAQ:INTC) intends to bring the unit to market though its Internet service provider channel partner program. Intel Dot.Station will be sold as part of an overall service package to ISPs, in the same way that cable services sell set-top boxes. According to Intel, the unit will not be sold in retail outlets.

The Intel device operates on the Linux operating system and features built-in calendar functions, address books and note-posting capabilities. Currently, the personal computer market remains dominated by machines using Intel processors and Microsoft Corp. software.

Greg Welch, Intel home products group director of marketing, said the decision to offer the Linux-based appliance was not designed to snub Microsoft (NASDAQ:MSFT) operating systems.

"The decision to use Linux software to run the Dot.Station came at the request of customers," Welch said.

The Dot.Station device consists of a single freestanding unit with a high-resolution monitor and a separate keyboard, as well as a built-in phone. It also offers ISPs a consumer-friendly price point of $500 to $700 per unit.

Welch said the inexpensive Web appliance was not designed to compete directly with full-featured personal computers and he did not expect the device to whittle away at the entry-level personal computer market segment.

"It's targeted to those households that don't yet have a PC, but are nonetheless interested in getting online," Welch said. "Installation consists of plugging in the power, plugging in the phone line, plugging in the keyboard and turning it on."

"I don't see it cutting into the PC business,'' Welch added. ''Quite frankly, it would be my expectation that if consumers use our device, they might find a need for a PC in their lives sooner than they would have if they had never bought the device.''

Welch said the appliance is also ISP-friendly, because the Linux operating platform allows service providers to remotely manage and upgrade the devices.

"Service providers would be able to customize the content and services of the devices to match their brands," Welch said.

Intel expects that its ISP partners would give the unit a way in tandem with Internet access deals. But Welch would not name which national ISP would be first to put the Dot.Station to work promoting branded Internet access.

"Our largest customer fully intends to offer the device to their customers at this point for free," Welch said.

Intel rolled out its ISP partnership program in July 1999 and has ties to more than 50 ISPs in North America and as many as 150 ISPs worldwide.

US Online Network is a privately held company that provides local ISPs with a platform to unite as a buying consortium. Currently the network consists of more than 100 independent ISPs that provide Internet access to over 1,000 cities in 42 states.

The Wenatchee, Washington-based organization is also one of Intel's ISP channel partners and will most likely put the Dot.Station appliance to work at its members request to recruit new subscribers.

Steve Klock, US Online Network chief executive officer, said the Intel ISP partnership program demonstrates its commitment to independent ISP owners and operators.

"Intel made a commitment to be a player in this market," Klock said. "If you want to make bets, better to invest in someone with deep pockets and leading technology."

Intel's Welch said research confirms that the Web appliance market segment isripe for growth.

"It's not unreasonable to guess that this is a billion-dollar business opportunity," Welch said. "The question is will that come in two years, three years, four years.''

The Intel Dot.Station Web device is the first in a family of products the firm intends to release. Intel expects to be shipping hundreds of thousands of the devices by year-end, just in time to ride the seasonal wave of holiday sales promotions.

Independent research firm Cahners In-Stat Group reported in April that the sales of line-powered Internet appliances would surge to well over 37 million units by 2004, up from just over 2 million units sold in 1999.

While the In-Stat forecast includes sales of set-top devices, it estimates that Internet appliances would account for $1.9 billion in sales of microprocessor and memory devices in four years.

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