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Intel sees future in home devices

Intel will become a big player in the digital television market; some wonder if the computer industry is ready for it.

Intel (INTC) will become a big player in the digital television market. Some wonder if the computer industry is ready for it.

The company detailed its plans yesterday to build the core components for TV set-top computers, which are expected to cost no more than $500 replete with a Pentium II processor and other personal-computer-like features. (See related story)

The implications of Intel driving this low-cost market which converges consumer electronics with computers are enormous, according to analysts. "People thought that sub-$1,000 PCs would be a flash in the pan. But then it wasn't. This could happen for set-top computers," said Dean McCarron, a principal at Mercury Research, a Scottsdale, Arizona based marketing research firm.

The set-top computer is a far cry from the PC, because of its radically low cost and because it is tied principally to the TV and the Internet, two areas where a full panoply of computer features are not required for most users.

Indeed, McCarron believes that PC manufacturers, to which Intel supplies many of the most critical components, need to understand this market better. "Consumer electronics is where they should be but they've missed the whole point," said McCarron, referring to the high-priced, $3,000-and-up PC-TVs that manufacturers such as Compaq Computer and Gateway 2000 have begun to market.

The market that looms for lower-cost set-top computers could be gigantic. "There could be as many 25 million [digital] set-top boxes in 1999. The way things are going, Intel could have most of that market," said Richard F. Doherty, director of The Envisioneering Group, a marketing research firm based in Seaford, New York.

Currently, MIPS supplies processors for many of the set-top boxes on the market. But Intel's marketing and technological clout could change this overnight say analysts.

Larry Gerbrandt, a senior analyst at Paul Kagan Associates in Carmel, California, agrees that the market potential is huge. "Intel is working to make sure they have an impact," he said.

"[A total of] 230 million TVs eventually have to be replaced. This a business targeting 100 percent of the homes [in the United States] vs. 40 percent of the homes [with personal computers]," he added.

A set-top box--or set-top computer, as Intel defines it--hooks up to a TV set and allows it take on computer features and applications such as email, basic word processing, data storage, and Web surfing. For users, this means an enhanced TV that allows them to hop, for instance, from a Microsoft Windows "channel" to an electronic program guide, then to email, the Internet, and back to television.

Intel showed a prototype set-top computer Thursday with browser software from NCI, an Oracle subsidiary that has developed software for set-top devices.

Intel may also supply components to WebTV, a major supplier of such boxes, based on comments from Intel executives yesterday.

Importantly, Intel's set-top computers and circuit boards will be to handle a wide variety of broadcasting formats, so the hodgepodge of formats apparently will no longer be an obstacle to displaying digital TV on the PC or via a set-top computer.

Envisioneering's Doherty noted that the Intel set-top computer is a way for people to get digital TV without spending thousands of dollars on a new, digital-ready set.

Intel also showed prototype circuit boards for personal computers that endow a PC with digital TV capabilities. These boards work with digital satellite TV and terrestrial digital TV.