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Leading trade show may reveal AOL's set-top plans

PC makers, online service providers and consumer electronics manufacturers will be showing all manner of products designed to access the Internet wirelessly and at high speeds this week at a trade show in Las Vegas.

PC makers, online service providers and consumer electronics manufacturers will be showing all manner of products designed to access the Internet this week at a trade show in Las Vegas, each hoping to capture the public's imagination.

Among the possible showstoppers on tap: America Online is expected to finally join the information appliance game, showing off TV set-top boxes and Web terminals designed specifically for its online service. Microsoft has been displaying both for months.

"AOL's entry into the consumer box business is going to send shivers up the backs of traditional box suppliers because they don't have the marketing reach that AOL does," said Jon Peddie, president of Jon Peddie Associates. "Every time one of their [19 million] customers touches email, they could get a marketing message to buy this box."

In the span of a few short years, the Consumer Electronics Show has become an excellent glimpse into the efforts of high-tech companies vying to push digital technologies into everyday life. As always, the question will be: Which of these next-generation devices will catch on with consumers?

In what would be its first public move in this arena in nearly 10 months, AOL is expected to show off the fruits of its relationship with DirecTV, according to people familiar with the matter. Last March, the company announced it intends to provide interactive TV services in a deal with the digital satellite programmer. Hughes Electronics and Philips Electronics will make the boxes based on processors based around the Intel architecture and software from Liberate Technologies.

It is not yet clear whether the companies involved will be publicly demonstrating the technology or showing it to retail partners behind closed doors, sources said. Neither AOL nor DirecTV was immediately available for comment.

The move would present new competition for Microsoft's WebTV and a variety of other companies looking to meld the TV and Internet experience together via devices ranging from DVD players to digital televisions.

There is also a likelihood that AOL in the near future will get into the other growing fad among hardware makers: Web terminals. Microsoft, Compaq, IBM and others plan to deliver easy-to-use terminals to consumers by the middle of the year. These simplified computer systems will allow users to surf the Web, exchange email and even make phone calls from a device with a keyboard and a small screen. Intel and NEC announced plans for a similar service in Japan in September.

The Dulles, Va.-based company's move into hardware has been much-anticipated by the rest of the industry, analysts say, because of the immense power the online service company wields with its enormous user base.

In other TV set-top news, Intel-powered boxes sold by Nokia for use in European markets are expected to be shown. Manufacturer Philips was not immediately available for comment.

Meanwhile, Microsoft is expected to further elaborate on plans to market the scaled-down Windows CE as a platform for digital television services, said Peddie. The push to become a major software purveyor in consumer electronics devices is significant for the software company because digital television offers broadcasters the ability to send video and data not only to TVs, but to PCs, game consoles, cable set-tops and portable devices.

Microsoft could also detail its plans for yet another market. The Redmond, Wash.-based giant is developing a game console that might compete against the likes of Sony's PlayStation II and Sega's Dreamcast, although the likelihood of an announcement at the show seems to be fading, analysts say. A spokesperson for Microsoft declined to comment.

"Microsoft very much wants this [game console] to happen," and is spending lots of money on the project, said Richard Doherty, president of Envisioneering Group, a consultancy. The company has been seeking opinions from game developers and others as to how to enter into the business, but still hasn't decided on a course of action, he said.

The trade show also will be the place where less-familiar companies will be competing for attention in the market for information appliances.

As previously reported, Acer has been conducting trials with service providers on its Internet appliances such as Internet set-tops and "smart" phones in North America. Acer will be showing off these and other gadgets at the show as the company attempts to make a comeback of sorts in the U.S. market.

Acer once had a respectable presence in the U.S. PC market, and analysts say it still holds around a 3.5 percent share based on PCs still in use. Still, mounting losses at the Acer America division forced the company to largely withdraw from the retail market earlier this year.

"Acer wants to have more brand presence so as to raise the value and margins on its Internet appliances. Whether or not they can extend [consumer familiarity with their PCs] into success in the info appliance space is not clear at this point," Peddie said.

Like the set-tops from DirecTV, Acer's TV set-top boxes are built around traditional PC hardware technology but use an interface that is not supplied by Microsoft, officials have said.