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Wired home next step for Compaq

Giving the day's keynote address, Compaq CEO Eckhard Pfeiffer describes how different rooms throughout one's residence will be equipped with easy-to-use devices connected to the world at large.

LAS VEGAS--Eckhard Pfeiffer is coming into your home.

Compaq's chief executive officer detailed his vision for the wired home this morning during a keynote speech at Comdex, describing how different rooms throughout one's residence will be equipped with a plethora of easy-to-use devices connected to the world at large.

Kitchens will come with separate electronic commerce devices, videoconferencing terminals, and email stations. PCs costing $500 or less will appear in dens and bedrooms, while PC/TV infotainment consoles with wireless keyboards will sit in the den. Tying all this together will be the "home server," a


Pfeiffer outlines digital home
relatively cheap server that will connect these devices through cable or wireless modems.

In turn, the home server will connect to the outside world through cable, satellite, or high-end digital communication services that will cost approximately $40 a month.

According to Pfeiffer, large PC vendors will increasingly be providing the lion's share of these goods due to consumers' desire for more simplified products and a wider variety of services from a single source. The top four PC vendors currently hold close to 35 percent of the market, he said. Within 5 years, they will own 70 percent.

Simplification, both in terms of products and the services that go with them, will be the next battleground for vendors, he said, and evolve rapidly over the next few years.

"The PC is too complex and imposing for many customers. For the market to keep growing, the PC has got to become more appliance-like," he said. "The future of our industry will revolve around one thing--providing our customers with a fully satisfying ownership experience."

Compaq's strategy will be two-fold, Pfeiffer indicated. One, the


Customer strategy: make it easy
company will make a wide variety of products for this market. Today, in fact, the company previewed its first color-screen handheld device.

As a gag, Pfeiffer also showed a promotional film of the Compaq "Buzz Pro," a simple device that translates computer-industry jargon into English.

Two, Compaq will begin to "product-ize" service offerings to make it easier for customers to purchase integration (or "connectivity") services. Although he did not elaborate on what these services might be, he indicated that customer demand will likely result in a high degree of customization.

"Custom-tailored services will become a dominant consideration," he said.

Due to the complexity of these types of installations and the large service component involved, Pfeiffer postulated that direct vendors like Dell will be at a disadvantage because they do not have relationships with resellers, who often become the parties who perform local services.

Further, the cost advantages previously enjoyed by the direct vendors has already evaporated because of the "build-to-order" initiative Compaq implemented earlier this year. "We have literally destroyed the direct vendors' pricing advantage," he trumpeted.

Until now, the home server has mostly been an abstract idea, but one that will likely become concrete in the near future. The devices will chiefly function as a Web server, pointed out Kimball Brown, an analyst with Dataquest. Interestingly, these devices could come to the market at close to $500 because they will use less cutting-edge technology than desktops. Many will use last-generation 486 processors, he said.

David Dukes, vice chairman of Ingram Micro, agreed with Pfeiffer that service will become one of the great differences among computer vendors as time goes on.

"Dell has clearly created brand preference in the corporate workplace," he said. "[But] It is interesting how a significant number of customers want the Dell brand but want to buy it from resellers."

When the price difference is finally eroded between Dell and other vendors, Dukes continued, "Relationships will determine sales again."