7, 2000 [Reuters] - The U.S. market for Internet appliances is entering a period
of rapid takeoff, and the new devices are expected to surpass consumer personal
computer shipments in 2002, a leading technology market research firm said.
appliances are easy-to-use, lower cost devices designed solely for accessing
the Internet. They do not typically have hard disk drives or some of the functions
of more costly but harder to use personal computers.
an even broader group of companies seek to address the "Post-PC" era with these
new devices, market research firm International Data Corp. (IDC) said it expected
the worldwide market for information appliances to exceed 89 million units,
or $17.8 billion in 2004 vs. 11 million units and $2.4 billion in 1999.
general, appliances are low-cost and generally are priced under $500, depending
on the type of device and ideally, they cost way under $500, IDC said.
to IDC, it includes the shipments of Internet gaming consoles (such as the Sega
Enterprises Ltd.'s Dreamcast), Internet accessible TVs (like Microsoft Corp.'s
WebTV Networks), Internet smart handheld devices (such as 3Com Corp.'s Palm
VII), Web terminals, e-mail terminals and screenphones.
these and other new devices arrive in the next few years, the Framingham, Mass.-based
IDC predicted that U.S. unit shipments of appliances would outnumber those of
consumer PCs by 2002.
consumer information appliances are forecast to reach over 25 million units
in 2002, while PCs are expected to hit about 23 million units in the United
groups of users
will be two ways it will evolve," said Kevin Hause, an analyst with IDC and
one of the authors of a new IDC report on the Internet appliance market. "One
group will be people who don't have PCs and who are intimidated or for whatever
reason, don't want a PC. This is where many companies are targeting today, i.e.,
'Let's get this for our grandparents, who don't have a PC but want to get on
other group, Hause said, is currently techno-savvy individuals, who already
have a PC in their home, but would like to have Internet access in their kitchen
for recipes, or in other parts of the house for many uses. He said these customers
might pay a few extra dollars a month, in addition to their current monthly
Internet service charge, to have an appliance in another room.
First, we want to get some terminology straight: we're not talking about Dreamcast
and WebTV. We're talking about appliances that may have a business use, but
need not be used exclusively for business purposes.
prediction is a continuation of the shift from PC-centric computing to Web-centric
computing, especially for the home market. Even with the proliferation of PCs
in recent years, a large percentage of households still do not have one, leaving
a large home population "Web-free". Continued growth of a consumer-focused Web
economy will require tapping into this market, so we expect this field to get
more crowded in the next year.
is presently losing the battle for the palmtop (with Palm OS holding approximately
80% of that market). We expect them to make a big push into the appliance space
through the "MSN Web Companion", which runs the Windows CE OS. Web Companions
are presently not expected to appear until August, 2000, so non-WinCE appliances
will need to ratchet up their sales in the meantime.
may also get tired of the "pre-announce" tactic, popularized by IBM years ago,
and adopted by MS. ["Pre-announce" is usually applied as follows: Company A
ships a new/innovative/different product. Company B, a market leader in many
areas, announces that they will have their own, better version of Company A's
product "real soon now". Consumers, not wanting to buck the market leader, wait
however many months/years for Company B to ship their product, while Company
A's once-promising product languishes.]
the short term, there will be market/vendor proliferation, until the marketplace
figures out which segments make sense.
appliance market has already started to heat up, and will continue to do so
over the next two years. How long this continues depends on two factors: initial
market penetration and technological advancement. We expect relatively slow
growth over the next six-nine months. Once the MSN Web Companion becomes available,
we expect increased growth, but not as great as Microsoft would like. The technological
advancement component refers to whether functionality is increased and price
is decreased sufficiently to entice a new class of user. It's obvious that this
(functionality up, prices down) will happen, it's just a question of to what
extent and how soon.
As with similar previous events, this announcement is of more interest to the
home user than to the corporate/business user. Corporate users will have limited
present use for appliances of this nature. We can envision a day when handheld
(i.e. cell phone size) appliances will have greater ubiquity. We do not believe
the "inflection point" (similar to when CDs finally passed vinyl LPs) is here
yet, but see it coming within three years (70% probability). We think it unlikely
that this market will grow 50% per year, though.
corporate users willing to try this "new" technology should evaluate their needs
against the functionality provided. For example, users committed to the Application
Service Provider (ASP) model will have far more interest than those corporations
whose employees are primarily "power" users, i.e. applications reside on the
user's desktop for performance reasons. Power users will have little interest
in appliances, because they already have what they need to perform their jobs
and surf the 'Net.