'Net appliances to get edge on PCs, IDC says

The dominance of the PC as an end-user access device will end within six years as Internet appliances become the hot commodity in the US, according to a study released by International Data (IDC). Internet appliances, such as television set-top boxes, Web-enabled telephones and videogame consoles, will gain in popularity with the growth of the Internet and with customers' needs for more access, according to IDC.

The dominance of the PC as an end-user access device will end within six years as Internet appliances become the hot commodity in the US, according to a study released by International Data (IDC).

Internet appliances, such as television set-top boxes, Web-enabled telephones and videogame consoles, will gain in popularity with the growth of the Internet and with customers' needs for more access, according to IDC.

The study looks at the PC and Internet appliance market from 1997 to 2002. Last year, PC shipments totaled 31.5 million units, for a 96 percent share of the access market, while shipments for Internet appliances totaled 1.4 million, IDC said. By 2002, PC shipments will grow to 56 million units, while Internet appliance shipments will leap to almost 42 million units, capturing almost 50% of the market.

IDC expects Internet appliance shipments will surpass PC shipments to account for the majority of the market by 2004 or 2005.

Microsoft has been the company most responsive to the shifts in this field, according to IDC. However, it can't rely solely on its Windows CE operating system for handheld devices as a software platform for appliances, but rather should develop an platform specifically for appliances, said Frank Gens, senior vice president of research and the director of Internet at IDC.

Intel also is expected to be at the forefront of the Internet appliance field, but has taken a less visible approach, Gens said. "There's no question they are thinking hard (about Internet devices), but ... so much of its own value is tied up with PCs," he said. "Perhaps some in the company imagine it's an either-or [situation], either its PCs or appliances. It's a myth -- the Internet appliance market will explode but not be a replacement (for the PC)."

PC suppliers, such as IBM , Compaq and Hewlett-Packard, are taking a reserved approach, according to Gens. The issue for these vendors is how to make a profit off a device that costs tens or hundreds of dollars, compared with a PC that costs $1,000, he said.

The short-term outlook could spell trouble for these suppliers and give consumer electronics suppliers, such as Sony , Nokia and WebTV Networks , an opportunity to enter the Internet appliances market. "These computer guys have a few things to learn," Gens said.

The expected boom in Internet appliances will bode well for Cyrix Systems, Texas Instruments, Advanced Micro Devices and other chip and peripherals vendors. Appliances are going to need more memory and disk capacity, the study said. This market will also benefit vendors of modems, hard drives, displays and printers.

Software suppliers, such as Lotus, face a dilemma with the appliance market and a new customer base. These vendors won't be able to charge high prices for software if an appliance costs between $20 and $200, Gens said.

The evolving market may cause some vendors to walk away because they will be unable to compete, Gens said. The Internet appliance market is "a developing, new IT industry with unique rules," he said.

The study, "Death of the PC-Centric Era," is available on IDC's web site, http://www.idc.com/.

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