Intel's Dot.Station joins crowded device market

Intel will enter the increasingly crowded field for Internet appliances today with the Dot.Station, a countertop terminal powered by Red Hat Linux that lets people surf the Web, exchange emails and make phone calls.

The Dot.Station--which will be announced today, shown next week in New York, and begin to reach customers in the third quarter--is the latest in a series of devices designed to bring the Internet into homes without PCs. Although many believe that the Internet device market will be huge, no company has really experienced a smash success.

The question looming over the industry, therefore, is which of the products--AOLTV, Palm VII, PlayStation2--will be the breakthrough device with the public. Right now, Intel's device is drawing mixed reaction from analysts.

"This category is pretty good," said Richard Doherty, an analyst at the Envisioneering Group. "Intel has a very good relationship with the (phone companies)."

Stephen Baker, an analyst at PC Data, asked, "Why would you get something like this when for a few hundred dollars more you can get a PC with a 17-inch screen?"

Intel will not sell the Dot.Station in stores but instead will sell it in volume to Web portals, banks, telecommunications companies and Internet service providers, which will then offer it to customers complete with service, said Greg Welch, director of marketing for the home products group at Intel.

"People think of this as a traditional consumer product. The appliance is closer to a cell phone. Without the service, they are as useful as a paperweight," he said. "I fully suspect that a lot of these customers will fully subsidize the cost."

The Dot.Station, which will carry the Intel brand, will also largely mark Intel's first major foray into the world of consumer electronics. The company has been selling home networking equipment and, through a joint venture with Mattel, some toys under its own brand name to consumers, but these efforts have been relatively small in scope.

The first major introduction

Gartner analyst Peter Lowber believes there are several hurdles keeping Net appliances from beating the PC in the consumer market. see commentary

of the device will occur in the third quarter in Europe. "Our largest customer is a company that is being built with the Web appliance in mind," Welch said.

Other customers include US West, which will market the devices in the United States, and NEC's BiGlobe and French company Laser Galeries Lafayette Group, which will market the device in Japan and Europe, respectively.

Technically, the terminal is similar to a Linux-based PC. It will come with a Celeron processor and an operating system from Red Hat Software, Welch said. Other Intel executives have said it will contain a Mozilla browser and messaging software from Telcordia.

Intel designed the unit, but a Taiwan company will do the actual manufacturing, Welch said.

In terms of design, Intel seems to be trying to avoid some of the problems that have cropped up with other Internet devices. The Dot.Station, for instance, will come with a hard drive, so consumers will be able to run applications or store data. The screen, while smaller than standard PC screens, is larger than what has been featured on the seemingly doomed screen phone.

On the other hand, these features add to the bottom line. The manufacturing cost of one of the terminals comes close to $500, Welch said.

These costs, along with current market circumstances, leave analysts divided as to the prospect of success. Envisioneering's Doherty believes that the public has already warmed to Internet access through devices other than the PC.

Smart appliances

"WebTV has paved the way," he said. Other companies, such as NetPliance, have also seen subscriber lists grow. Subsidizing a $500 device can be accomplished through advertising contracts and long-term service agreements, he added.

Intel also enjoys a fairly close relationship with most of the telephone carriers, which could help cement deals.

By contrast, PC Data's Baker doesn't think countertop devices offer much to consumers. The Dot.Stations cost about as much as low-end PCs, which also get sold for next to nothing through subsidy service contracts. At the same time, either WebTV or AOLTV will be more economical than the Dot.Station.

The prospective market is also fairly small. Close to 60 percent of U.S. households have a computer, Baker noted.

"You're starting to run out of prospects," he said.