Gateway's Web appliance, home Net plan coming Friday

The San Diego, Calif.-based company also is expected to outline its vision for the connected home.

Unlike PCs, Web appliances are simple-function devices largely used for quick access to content on the Internet or for sending email. Gateway unfurled prototypes of the product in April and promised that other devices would follow.

While similar to PCs, these devices will also attempt to provide a distinctly different experience. For one thing, bootup time will be minimized. The new device will come with a new interface called Instant AOL.

Second, these appliances will come with new types of applications with an emphasis on streaming media. In an interview in May, Gateway CEO Jeff Weitzen said that the upcoming appliances "are going to do more than just have instant Net access through AOL....The real key is going to be what the content is going to look like."

Third, these devices, if successful, should accelerate the trend that is forcing content companies, hardware makers, Internet service providers and others into ever tighter alliances. In Friday's presentation in New York, Gateway's Weitzen, AOL Interactive Services president Barry Schuler, Broadcom CEO Henry Nicholas, and Transmeta CEO Dave Ditzel will appear on stage together. It probably won't be the last time either.

Gateway had been expected to unveil the product next week at the Comdex trade show, but instead will make the announcement at a New York event on Friday.

With the move, the company is carving out a piece of an emerging market.

"The new Gateway Internet appliance appears to be positioned well for penetration into the home market," said Technology Business Research analyst Brooks Gray. "Gateway is leading the major PC vendors into this market."

But Gateway is by no means alone. Microsoft and Compaq have an early start with a Web appliance that uses Microsoft's MSN Internet service, unveiled in August. The iPaq Home Internet Appliance, which Compaq updated in October, sells for $199 with a three-year commitment to MSN.

Gateway's Web appliance will use Transmeta's Crusoe processor, sources said. The processor has come under fire recently, after IBM canceled plans to use it in ThinkPad portables. To date, Transmeta's chips have been used almost exclusively in portable devices.

Leading up to the product launch, Gateway on Thursday announced a strategic relationship with chipmaker Broadcom. The companies agreed to develop products for delivering streaming audio and video content between cable modems, digital music players, Internet appliances, PCs and television sets.

Gateway for the last five weeks has been shipping Broadcom chipsets on its Performance and Select PC lines, the companies said. The technology allows consumers to network PCs together or with other consumer electronics devices over phone lines.

The relationship with Broadcom is expected to play an important role in Friday's Web appliance announcement. Broadcom Home Phoneline Networking Alliance (HomePNA) 2.0 chipsets will appear in the Web appliance as well, said sources familiar with the situation.

Drawing on the success of its more than 300 Country Stores nationwide, Gateway plans to sell consumers on the concept of a connected home, in which PCs, consumer electronic devices and other products can be hooked together.

The first generation of products will rely on HomePNA, but Gateway could expand to other technologies eventually. The Web appliance is expected to play an important role in the connected home.

Gateway is expected to pull in some revenue through extended content and other services, something the company has been pushing through the Country Stores. About half of Gateway's operating income during the third quarter came from services and software sales.

"While the revenue potential for Internet appliances in the near term may not have a significant impact on Gateway's financials, they are clearly establishing solid brand recognition," Gray said.