Shares in the company, fresh off its initial public offering last week, dropped about 18 percent today, closing the regular trading day at $18, as investors pondered whether the company's unexpected popularity would run it further into the red.
Netpliance, incorporated barely over a year ago, offers the i-opener, a stand-alone device priced for a limited time at $99 (plus $21 for monthly service) for easy Internet access. The device offers simplified Web access and email without the use of a full-fledged PC.
The company doesn't make money on sales of the hardware, which costs between $300 to $400 to make, according to estimates from industry analysts. Instead, the company intends to make money off the monthly service fee.
There were fresh questions about how well that model will work, though, after details became public for modifications that allow users to run software on the unit and bypass the monthly service.
Las Vegas engineer Ken Segler, who works on slot machines during the day, said he needed only a couple of hours to add a hard disk to his new i-opener and load it with Linux.
Since news of the exploit first appeared on the Linux news site Slashdot.org, Segler said he has been overwhelmed with requests for a small kit he is selling that will turn the i-opener into a full fledged PC for about $200 total. He's received 400 orders for the cables needed, and he has about 1,000 emails waiting to be answered, he estimates.
An otherwise amusing story about people who love to take things apart was suddenly turning into a potentially big problem for the company today, though. Investors selling the stock today may have had visions of throngs of programmers lining up to buy a computer that's only cheap because the cost of the device is subsidized by the cost of the Internet service--which suddenly wasn't required if a few more hardware tweaks were made.
The newfound popularity of the device may have played a hand in causing a temporary shortage in some retail outlets. Most Circuit City stores in the San Francisco area have run out of the system, according to emails from CNET News.com readers. The systems are available from the company's Web site, according to a spokesperson, and more systems were shipped to retailers over the weekend.
But Segler didn't think the news was necessarily bad for Netpliance.
"They have a great product," he said. "There are a bunch of people who bought one to tear it apart, then bought one to be used as it's intended to be, for their mom."
Not only that, but taking the system apart and adding the necessary cable to make the system run software isn't something the novice user can be expected to do. Netpliance said that about 70 percent of those who have already bought the system are first-time Internet users.
Netpliance didn't appear to be too worried about the hacks, either. Instead, they're thinking about tapping into the kind of engineering expertise that's hard to hire at start-up companies.
"We are interested in putting together a program to collaborate with the Linux community that essentially harnesses their knowledge," said Munira Fareed, a spokeswoman for the company.
While the i-opener device doesn't currently use the Linux operating system, Fareed said the company has always had an interest in it. The only problem has been finding a way to fit it into the limited amount of memory that ships with the device. Fareed said the company is looking at ways to work with the engineers and programmers who have been tinkering with the innards of the device.
Also, the company is hoping to tap into a community that has expertise in writing software drivers--small programs that help a piece of hardware talk to an add-on device such as a cable or DSL modem--and even in writing new applications such as online bill paying and calendars, said Fareed.
"We are not about taking legal action (or) resisting the open-source community," Fareed said.
"The Linux programmers have never been allowed to write consumer applications. Linux has mainly been aimed at the enterprise. Here there is a chance (for programmers) to work on consumer applications that makes things simpler for their own moms."
Segler thinks that the company may even be able to offer a higher priced, special version for Linux users that's easy to modify for maybe as much as $400, based on the emails he's seen, just because the system's design is "cool," he said.
Exact details of any developer programs have not been figured out yet--the whole phenomenon is barely a week old.
"In the end, we want to get new appliances and applications to consumers. If anyone can help us do that, that's great," Fareed said.
Meanwhile, Segler said "it's kind of neat" to have gained so much attention from the exploit.
Now, he too has to deal with the price of fame. His Web site, which details how to make the modifications, has received over 300,000 hits. His Internet service provider has had to dedicate more bandwidth to serving up his page to interested viewers and has already sent him a bill for an extra $1,000 over his usual site hosting fee.