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Info appliances set to soar
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February 7, 2000: 5:18 p.m. ET
Research report predicts sales will exceed those of consumer PCs by 2002
By David Kleinbard
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NEW YORK (CNNfn) - U.S. unit shipments of consumer information appliances, such as Internet gaming consoles and NetTVs, will outnumber those of consumer PCs by 2002, according to a market research report issued today by International Data Corp.
Information appliances, used primarily to access the Internet, are designed to be lower in cost and simpler to use than PCs. They usually don't have hard drives and the sophisticated processing power of full-size personal computers.
"As a rapidly growing group of vendors attempt to address the 'Post PC Era,' the worldwide market for information appliances will exceed 89 million units, or $17.8 billion, in 2004, up from a market of 11 million units and $2.4 billion in 1999," IDC forecast.
Information appliances already drawing consumer demand include: the Palm VII handheld computer; the Sega Dreamcast videogame console; WebTV; the I-opener from Netpliance; and the iPhone from InfoGear Technology. The devices IDC included in its forecast include Internet gaming consoles, NetTVs, Internet smart handheld devices, Web terminals, e-mail terminals, and screen phones.
"As the Internet becomes more tightly woven into everyday life, an increasing number of consumers will desire the applications and services it can provide," said Bryan Ma, analyst for IDC's Consumer Devices research program. "Current online users want access to services in more locations and situations, while many other consumers desire Internet access without the inherent complexities of PCs. "
"The devices that will lead the information appliance market are ones that take advantage of existing infrastructures and usage patterns," said Kevin Hause, manager for IDC's Consumer Devices research program. "Devices such as NetTV set-top boxes, as well as Internet gaming consoles, will benefit from consumers' familiarity with the television. "
Microsoft Corp. wants information appliance makers to power their devices with its Windows CE operating system. Windows CE is designed to allow these appliances to communicate with each other, share information with Windows-based PCs, and connect to the Internet.
While several major hardware companies use the CE operating system for their handheld computers, IDC's Hause said that the software giant is unlikely to dominate software for information appliances the way it rules the PC software market.
"Microsoft is not going to establish a chokehold on the information appliances industry," Hause said. "These appliances don't need a standardized operating system the way PCs do. In many cases, the consumer will have no idea what the operating system is, since it's meant to be completely hidden."
3Com corp.'s Palm division now dominates the market for handheld computing devices, having sold more than 5.5 million Palm devices worldwide as of the end of last year. Palm's revenues have grown from $1 million in its 1995 fiscal year to $564 million in fiscal 1999. The recently introduced Palm VII allows users to send and receive Internet content in a format optimized for handheld devices.
WebTV Networks, Inc., owned by Microsoft, delivers interactive television and Internet access via standard television sets. customer demand for personal television services, including the ability to pause live television, is forecasted to grow to nearly 14 million users in the next five years.
Netpliance's I-Opener is a $300 Internet access device that consists of a keyboard with a screen attached. It's designed to work right out of the box, with no special set-up aside from plugging it into a phone line. InfoGear's iPhone, which costs $400, is a telephone with a touch screen, keyboard and software that allows users to communicate by phone and e-mail, access the Internet, and conduct e-commerce transactions such as online shopping. 
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