Gateway, AOL Tap Transmeta for Net Appliances

SAN MATEO (05/31/2000) - Upstart processor vendor Transmeta Corp. said yesterday that Gateway 2000 Inc. will use its Crusoe chips and Mobile Linux operating system in forthcoming Internet appliances that the hardware vendor is developing with partner America Online Inc.

Gateway and AOL will use the Crusoe processors and Mobile Linux in at least two jointly-branded, legacy-free Internet appliances (IAs) aimed at providing consumers with easy access to the Internet, said John Spelich, the director of corporate communications at Gateway.

The first of the two IAs will hit the market just in time for Christmas, with a second scheduled to follow in the first quarter of 2001, according to Spelich.

Bearing a sub-$500 price tag, the Linux powered IAs will be marketed in a variety of ways by both Gateway and AOL. The units will be sold direct from Gateway online, through Gateway's Country Store, or through AOL's Web site.

Free deployment of the Gateway/AOL IAs through Internet subscription deals with local telecommunications companies is also in the works, said Spelich.

Transmeta, which has no manufacturing facilities of its own, has yet to ship Crusoe processors in volume, although Hsinchu, Taiwan-based contract manufacturer Taiwan Semiconductor Manufacturing earlier this month said it was ready to start volume production of the chips whenever Transmeta gives the word.

Intel, which possesses massive manufacturing facilities, announced last January it plans to enter the consumer IA space with "multiple skews" of Web Appliances, said Marta Hasler, the marketing manger at Intel Home products Group.

The first Intel IA offering, a device with an integrated phone receiver and 14-inch CRT screen, is due out "sometime this summer" and will run a version of Linux, said Hasler.

"We are definitely targeting consumers that are not on the Internet today," said Hasler, who emphasized that plans from Intel to introduce corporate or small-business IAs "haven't been announced as yet."

Likewise, plans for Gateway to market an IA designed for business also "have not been discussed," said Spelich.

Dean McCarron, an analyst at Mercury Research, in Scottsdale, Ariz., thinks the success of recent moves by both Compaq and Intel into the consumer IA space will all be a matter of lowering price points.

"As the price comes down the volume goes up," said McCarron. "As they start pushing these systems and (IA) prices drop below where the PC is, you are going to see larger unit volumes."

But McCarron warns that the traditional PC is already deeply embedded into the consumer marketplace.

"(The success of IAs) will be fairly evident within two to three years, but given the PC has been around for 20 years, it may be 10 years before we see a $99 (IA)," said McCarron.

AOL and Gateway were among a group of investors that injected $88 million into the formerly secretive chip developer in April.

Three major Taiwan-based contract manufacturers of notebook PCs were also among the investors. One of them, First International Computer, quietly showed off a prototype of a notebook powered by a Crusoe processor at the CeBit trade show held in Hanover, Germany, in late February.

Transmeta Corp., in Santa Clara, Calif., can be reached at www.transmeta.com.

America Online Inc., in Dulles, Va., is at www.aol.com/. Intel Corp., based in Santa Clara, Calif., is at www.intel.com/. Gateway, based in Sioux City, Iowa, is at www.gateway.com.

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