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Ellison's Net computer gets a pricey accessory

Larry Ellison's New Internet Computer Co. introduces a flat-panel monitor that costs more than twice as much as the $199 Internet appliance it complements.

    Will consumers pay more than $660 for an Internet appliance promoted as a cheap PC alternative?

    Larry Ellison's New Internet Computer Co. introduced a $475 flat-panel monitor Thursday to complement the $199 New Internet Computer (NIC). Ellison is chairman of both Oracle and NIC Co.

    The company has touted the NIC--a Linux-based Internet appliance--as costing less than PCs while offering simple, straightforward Web access.

    But the new 12.1-inch LCD (liquid crystal display), which delivers resolution of only 800 by 600, drives up the system cost to more than $660. With the original 15-inch CRT (cathode ray tube) display, the NIC sells for about $320.

    "Once you start hitting that $600 or $700 price point, you're starting to (reach) people's ability to buy a PC," PC Data analyst Stephen Baker said. "The reasons for choosing an Internet appliance are much less compelling in that price range."

    Gina Smith, NIC Co.'s chief executive, downplayed the high cost of the monitor vs. that of the NIC.

    "We're just offering this as an option," she said. "You know there are people who put Harmon Kardon speakers on a Toyota, and some people think those people are silly people."

    For those people interested in a "hot-looking monitor," the NIC's low price "means you can spend more money on accessories," she said. "At $199, you save some money, so put it into the options."

    The price of the flat-panel monitor has actually crept up a bit since Smith first touted it in December. At the time, she said it would sell for $399.

    Unlike PCs, which can play games or run general-purpose software, Internet appliances offer limited functions, with the emphasis on browsing the Web. Compaq Computer and Gateway are among the PC companies offering the devices, which have been criticized by analysts for their price, typically between $500 and $600.

    With a CRT, NIC has a competitive edge. But the introduction of the LCD display erodes the NIC's price advantage, analysts said. And with flat-panel prices rapidly falling, they add, spending $475 on a 12.1-inch display isn't such a great deal.

    "That's overpriced for that size panel," IDC analyst Roger Kay said.

    Flat-panel prices have dropped dramatically over the last several months. Retailer PC Connection, for example, offers 15-inch LCDs for as low as $499.

    "We just thought we'd offer one (flat-panel display) because it matches" the system's sleek design, said Smith, who noted that about half of the NICs are sold without monitors.

    Out of touch?
    Kay said it seems that NIC Co. is out of touch with the competitive-pricing approach.

    "Larry Ellison, probably because of his position in the world, is fairly clueless about what normal people's budgets look like," Kay said. "It's almost like (Apple Computer CEO) Steve Jobs. He thinks if something is cool--inherently cool--he doesn't really think a lot about the kind of choices the people he is selling to have to make."

    Still, the NIC has much to offer, analysts said. PC Data's Baker noted that the 12.1-inch display is larger than those for most competing Internet appliances, which typically come with 10.4-inch LCDs.

    But Baker sees the small displays in general as a major deterrent to Internet appliances' success.

    "The biggest thing with the screens is you're asking people to surf the Internet--which is a visible medium--with a small screen," he said. "That doesn't exactly make a lot of sense."

    Technology Business Research analyst Bob Sutherland believes Internet appliances fit certain niche markets but little more. The analyst predicted that the products will prove to be a big failure, and that "Gateway, Compaq and others manufacturing them will bleed cash" when that happens.

    NIC at night
    Ellison co-founded San Francisco-based NIC Co. about a year ago. The start-up released its first Internet appliance in August, as part of Ellison's second stab at selling networked computers.

    In 1995, Ellison started touting the Network Computer--a PC-like system that connected to servers but didn't have a hard drive--as the natural successor to the PC.

    His vision was similar to that of Sun Microsystems Chief Executive Scott McNealy, who evangelized networked computers running Java as eventual replacements to Windows-based PCs.

    But dramatic changes in the marketplace, such as rapidly falling PC prices, tarnished the devices' luster. Sun's JavaStation network computer failed to catch on as the company had planned. Ellison's Network Computer company morphed into a software provider, abandoning its hardware roots.

    In the new gambit, Ellison's NIC, like other similar devices, must connect to the Internet instead of to corporate servers.

    The standard NIC features a Via Cyrix MII PR266 processor, 64MB of RAM, a 56kbps modem, a network card, and two USB ports. The monitor is sold separately.

    Unlike PCs and most other Internet appliances, system software is run from the CD-ROM drive, facilitating upgrades. In January, NIC Co. announced it would begin shipping version 2.0 of the software in February. The new version includes EarthLink software as part of an Internet access agreement. Internet access also is available through AT&T WorldNet and Mindspring.