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Study shows new Net appliances won't stymie PC sales

A recent report could give new hope to hardware makers working diligently to expand their businesses in light of increasingly ominous signs that the PC market is on its last legs.

A recent report could give new hope to hardware makers working diligently to expand their businesses in light of increasingly ominous signs that the PC market is on its last legs.

A research report released today claims that the recent boom in so-called Internet appliances--set-top boxes, handheld devices and other Web-enabled hardware--could help expand the sales of PCs and related technology in the next five years.

Analysts and industry experts have for some time been predicting the death of the traditional PC, as consumers and corporations clamor for less-expensive, easier ways to connect to the Internet. As hardware prices have fallen--recent estimates point to a clip of 15 percent annually--leading PC makers have scrambled to find other strategies to keep their businesses afloat.

PC makers like Compaq Computer, Hewlett-Packard and IBM have all released new, stripped-down versions of personal computers to meet the growing demand for Net devices.

"Key factors will be the industry's ability to bring smaller, less complex, cheaper products to the business market and industrially designed products to the home," Dataquest analyst Charles Smulders said in an earlier report about the PC industry.

Yet today's report from Buffalo Grove, Ill.-based eTForecasts predicts that the number of PCs worldwide will double--from about 500 million to 1 billion--within the next five years. In addition, new PC sales will more than double to approximately 1.7 billion units annually during that same time frame.

eTForecast president Egil Juliussen said that the demand for information appliances will create new opportunities in the market and help PC makers find new ways to push traditional PC products, such as servers, as well as "hybrid" Web appliances.

"As the information appliances market grows, it actually creates new opportunities for the PC industry," he explained. "When you have hundreds of millions of Web cellular phones and set-top boxes and all those things, for example, they're going to have to access content. That content generally is going to be stored on PC servers."

The research group said that sales of servers would get a boost from the increasing demand for Net appliances. Juliussen predicts that server sales will grow from 3.7 million units last year to 11.5 million units in 2005.

"To develop content for information applications to access, developments aren't going to be on information appliances, they're going to be high-end desktops," Juliussen said. "All of this generates tremendous demand for the PC, and that's why it's not fading as we originally thought."

The data could bolster emerging strategies from Compaq, HP and IBM, companies that have been looking for ways to extend their massive PC operations rather than abandon them.

Juliussen pointed out that many firms already are working to answer the call for Net appliances.

Internet PCs, such as the Compaq iPaq, represent the first generation of these hybrid devices, Juliussen said. Compaq, which touts iPaq as an Internet appliance, developed the device using off-the-shelf PC parts.

Sales of PC components should increase as more computer makers realize they can push streamlined devices that incorporate attributes of PCs as well as information appliances, Juliussen said.

IBM has been the most aggressive in this market, abandoning its "one-size-fits-all" approach to computing. Earlier this week IBM started delivering a simplified hybrid PC appliance to Fidelity Investments. Fidelity will distribute the device to its customers, who will use it to access customized Web sites.

Rather than develop 1999: The year in technologytrue information appliances, such as set-top boxes and cellular devices, Armonk, N.Y.-based IBM has partnered with Nokia, Motorola and other companies with expertise in the area. IBM also is developing other information hybrid devices, such as a wearable PC.

Compaq is betting big on iPaq but also is extending its reach into more robust servers. The Houston-based computer maker last week announced a new server-storage strategy, eGeneration, and the licensing of 32-processor server technology from Unisys.

Compaq is taking the high-low approach of offering low-cost, PC-based information appliances to customers with powerful servers for delivering content.

The coming of large Windows-based servers capable of working with up to 32 processors and more is perfectly timed for the content demand information appliances will create, Juliussen said.

eTForecasts estimates that during the next decade, there will be 500 million information appliances and 1 billion Web cellular phones capable of accessing content handled by corporate servers.

But those figures do not account for hybrid devices, such as iPaq, the e-Vectra from HP and IBM's "Stardust" PC. These hybrids could more than double the amount of devices accessing Web-based content.