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Be tries free software strategy again

Admitting that too few people are willing to pay for an alternative to Windows, the company decides to offer its operating system for no cost.

Admitting that too few people are willing to pay for an alternative to Windows operating systems, Be Inc. has decided to offer its software for free--again.

This time, the BeOS will be available for free to any individual users who register with the company, starting with the next version of the software, to be released this quarter. The move portends a continued shift away from the desktop PC software and toward so-called information appliances such as handheld devices and TV set-top boxes--an arena where Be faces more competitors, albeit less entrenched ones than Microsoft.

This isn't the first time the company has tried to woo customers by offering its main product for free. When the company failed to gain traction against Microsoft's Windows operating system, the company's chief executive, Jean Louis Gassee, last year offered the software for no cost in to any PC maker that would make Be's products the first that users see on starting up a computer. No takers were ever announced.

"The Internet appliance opportunity is now. We are shifting our resources towards that opportunity, and we're using the desktop version as our calling card (for people) to become more familiar with BeOS technology," said Steve Sakoman, who was named Be's chief operating officer today.

Stock in Be dropped $3, or about 15 percent, to $16.38 in afternoon trading on the news.

Be's decision will hurt its revenues for some time to come. Be said it will not realize the revenues previously anticipated from sales of the desktop version of its operating system. That amounts to some 85 percent of the estimated $16 million in revenue the company was expected to generate, according to a consensus of analyst estimates compiled by First Call.

Perhaps Be is hoping to follow in the footsteps of companies riding the coattails of the surge of interest in Linux, another free operating system. Some Linux companies have been raking in the cash lately, going public with billion-dollar valuations and negligible earnings.

But in the market for free operating system software, Be has less momentum than Linux, which is finding favor among companies wanting to use the open-source software to serve up Web pages. Companies such as Red Hat are providing technical support and consulting services as their primary means of income, not software sales.

Be's focus, meanwhile, has been on providing an operating system that is tuned for audio and video content production. The BeOS was originally targeted for use by Apple Macintosh users, but after Apple backed out of negotiations to buy the company in 1996, Be shifted its focus to producing an operating system for use on Intel-based PCs in March 1998.

That strategy started to shift again in 1999, with the first visible signs being evidenced in the company's plans to go public. Executives said they are further emphasizing the development of products for the information appliance market as the company's best chance for growth.

Sakoman pointed to recent announcements the company has made as evidence that the new strategy is working.

Be recently announced that it is working with Compaq Computer to design information appliances such as Web terminals that would use its software. The licensing arrangement, however, isn't a guarantee that Compaq will use Be's software, Compaq has said. More recently, Colorado-based Qubit said it would use a version of the BeOS, code-named "Stinger," in its upcoming tablet computer for Web surfing that's expected next year.

"The AOL-Time Warner deal demonstrates that You've got Time Warner the landscape is really changing (for Internet appliances). The emergence of the Internet and these new devices is just opening up a completely different set of opportunities for software vendors like ourselves," Sakoman said.

Just how big that opportunity will be is anybody's guess. Right now, the market barely exists, and it may be some time before the moves pay off. But by 2005, market research firm Strategy Analytics estimates that the info appliance segment, excluding Web-enabled cell phones and handheld computing devices, could total $5.6 billion in the United States alone.

There will be plenty of companies vying for those dollars. In addition to facing competition in the form of software from Microsoft, Liberate Technologies, Wind River Systems, Spyglass and others, Be will face competition from Linux in the consumer electronics market as well.

Corel Corporation said today it has entered into an agreement to acquire up to a 30 percent stake in OE/ONE.com, an Ottawa, Ontario-based start-up company developing an Internet appliance platform based on Corel's revisions to the Linux operating system.

Already, TiVo, which designs digital video recorder devices made and marketed by Philips and Sony, uses Linux in its products.