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Hardware firms cash in beyond the PC

The dawning of the so-called information appliance market is barely underway, but it's rapidly gaining credibility as several companies talk up plans to generate cash.

The dawning of the so-called information appliance market is barely underway, but it's rapidly gaining credibility as companies such as Wink Communications, Bsquare, and TiVo today talked up plans to scoop up cash for their ventures.

The term "information appliance" refers to a range of Internet-access devices, including TV set-top boxes, handheld computers, and cellular phones. Despite its awkward name, this device is quickly becoming known beyond the technology realm because of its vast implications for industries ranging from entertainment and media to computing and consumer electronics.

The prime-time assault on the small screen is amassing a sizable warchest

on Wall Street. Tomorrow, ReplayTV is expected to announce that it has gained investments totaling $57 million from heavyweights such as Disney, Showtime, Time Warner, and ten others.

Close behind is software maker Wink Communications, which is taking its own steps toward going public. It said in amended filings with the Securities and Exchange Commission that it is proposing to raise more than $77.3 million by issuing 4.83 million shares of common stock at $14 to $16 per share.

Wink, based in Alameda, California, makes software for interactive television. Its technology can allow consumers to respond instantly to ads and order products through cable TV set-top boxes or Wink-outfitted televisions. The company first filed to go public in June of 1998 before withdrawing the offering due to market conditions later that year.

This is the information appliance version of the fast-and-loose Internet IPO phenomenon--most of the companies supplying software for information appliances haven't seen much, if any, revenue from the shipment of devices.

Wink, for instance, lost $9.2 million in the six-month period ending June 1999, compared to losses of $14 million for the same period a year ago. To date, the company said it has accumulated losses of more than $40 million.

Wink follows other information appliance IPOs this year from WorldGate and Liberate Technologies, formerly Network Computing. Liberate Technologies rose 27 percent on its first day of trading in late July to 20.375, which was a fairly solid performance in a market that has been less kind to technology IPOs of late.

The stock has since fallen back to 18.125, above the offering price of 16 per share. WorldGate also did well, gaining 62 percent on its first day of trading in April to close at 34, later peaking at 55.75 per share before falling back to around 34 in today's trading. The main product for both companies is software that enables interactive television.

Still, these companies are banking that predictions of a booming market will materialize. According to International Data Corporation, the global market for information appliances will grow 76 percent annually to 55.7 million annual unit shipments in 2002.

Among future IPOs is Bsquare, which today filed to go public. The company said in its registration statement that it intends to raise as much as $60 million from a sale of common stock. The company did not state how many shares would be offered, nor what price they would be offered at.

Bsquare provides software and engineering services for Windows CE-based devices such as TV set-top boxes, industrial devices, gaming systems, handheld devices, consumer appliances. Windows CE is Microsoft's scaled down operating system.

Unlike many such companies, Bsquare is currently profitable--the company stated in its filing that it had earnings of $434,000 on $9.7 million in revenue for the period ended June 30, 1999, compared to earnings of $361,000 on $5 million in revenue for the same period a year ago.

The company has also posted six straight profitable quarters. The difference: Most of Bsquare's business is related to the market for Windows CE handheld devices (indeed, Microsoft itself makes up the majority of Bsquare's revenue), and it also offers software for sale to consumers.

TiVo, another company which has filed for an IPO, said today that America Online would join the star-studded list of investors in the company. AOL is working with TiVo to incorporate technology for digital video recording into its upcoming AOL TV service. TiVo's service enables consumers to create a customized television lineup for viewing at any time by recording their shows on a hard disk drive.