Acer to Jump on Internet Appliance Bandwagon

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Event Summary

December 27, 1999 (ZDNet) - In the latest example of PC companies trying to cash in on the supposed "post-PC" era of Internet devices, computer maker Acer is planning to launch a line of Internet appliances at next month's Consumer Electronics Show, in Las Vegas, according to a company source.

Acer's new products will include the I-Station, a simplified computer based on Microsoft's Web Companion software that connects to Microsoft's MSN service. The I-Station, expected to become available in spring 2000, is designed to shield users from sophisticated PC features.

Like other appliances to be based on the Web Companion platform, Acer's I-Station does not include a hard drive or a floppy drive, and will not be able to run any traditional PC applications or games. The I-Station initially will include a 56K modem; future models are expected to incorporate broadband connectivity. Pricing for the I-Station is not available, but is expected to be much less than that of a standard PC.

Market Impact

This announcement means yet another major PC vendor will be trying to get a piece of the Internet appliance action. The entry of Acer into this market will not increase the market growth appreciably. We believe most of Acer's sales will be into its installed base, but Acer may win new customers if the pricing is attractive enough.

Acer will have to contend with Compaq, Dell, Microsoft (also expected to show its "Web Companion" at CES) and Intel, as well as smaller players such as Netpliance. This adds up to stiff competition in this market, and it is not clear that Acer will gain more than 3-5% of it. However, even 3-5% will delay market consolidation, if only modestly. Although most of the above-mentioned companies will not ship appliances until spring 2000, we expect market consolidation to start before the end of 2000.

User Recommendations

Users should care about this announcement only if Acer prices its unit low enough - anything over $200 is hardly a bargain. If Acer does fall within this pricing range, then the consumer market is its best target. The business market has limited use for a diskless terminal, with the possible exception of Application Service Provider-related infrastructures. With only a 56K modem initially, this is hardly suitable for ASP use. Acer (and others built on the Web Companion platform) must provide broadband before the business market will consider it seriously. Even then, having a diskless terminal means a business must support the back end with heavy-duty servers and major-league disk farms.

Although the marketplace in general shows a willingness to recycle old ideas as if they were suddenly new, we question whether resurrecting the big server/relatively dumb terminal idea is where the market should head. Until the world goes back to this computing model, this product is best left at home.

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