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Intel's "New Best Friend" for Web Appliances is Linux

Written By: R. Krause
Published On: January 20 2000

Event Summary

1/5/2000 [WSJ Interactive Edition] - Intel has announced a brand of Web appliances that don't use Microsoft's Windows operating software. Instead, the new devices will run on the Linux operating system, which many customers are concluding is ideal for simple Web-surfing machines.

According to Claude Leglise, vice president of Intel's architecture business group and head of its home products group, these appliances will be geared toward the home/consumer market, and will initially be made by consumer electronics manufacturers.

Besides making the appliances, due to begin shipping sometime this year, Intel is also packaging all the necessary software and services, such as management software that service providers can use to upgrade the software in the appliances remotely. To deliver such services, such as tying together all home message-recording services, Intel signed an agreement with Telcordia Technologies Inc. of Morristown, N.J., the former Bellcore research center. With the technology, a customer could use the appliance to look at e-mail and read a list of messages, whether they be e-mail messages, paging messages or voice mail.

Market Impact

Microsoft cannot be happy about this announcement - this is a big win for the Linux community. Intel's decision to reduce system costs by eliminating the license fee(s) associated with Windows means MS may be losing out on "owning" this potentially large market. Compaq's recent decision to use BeOS on its future Internet appliances only compounds Redmond's problems. With the Palm OS owning approximately 80% of the handheld market, with Windows CE a distant second, Microsoft risks being consigned to the middle of the market, with Unix and various enterprise-class OSes at the high end.

We expect one of the immediate effects to be an aggressive Microsoft push of Windows CE. In addition, this announcement may cause Microsoft to reduce prices significantly for its non-CE operating systems, although we think that unlikely (25% probability). What we think is more likely, although more difficult to do, is Microsoft trying to co-opt Linux (often referred to "embrace and extend"), so that they can own at least part of that market.

We also see Be, Inc., producer of BeOS, as a potential loser in this market. BeOS-adherents love it as an operating system, but Linux may gain the upper hand because of its greater presence in both the larger-hardware and software applications markets.

In general, this is a boost for a market still in its relative infancy. We believe Intel will end up garnering a large portion of this market, either under its own badge or through third-party vendors. This means consolidation, which we expect to take place within 18 months.

User Recommendations

The potential benefits of this announcement are significant, but the products are not here yet, and will not be until later this year. Although Intel has been known to announce initiatives which end up getting quietly dropped later, we expect Intel to follow through with this.

These products will be consumer products and there will be a limited focus on corporate environments. However, businesses who do not need fully-loaded PCs, whose employees need lots of Web surfing capability and not much else, and can deal with a Linux-based or mixed environment, may find these appliances a good investment. Users need to assess their business requirements and determine what kind of IT infrastructure will be required. If Web appliances fit the model, they should be considered seriously.

 
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