December 20, 1999 3:00 PM PST

Be, Compaq in software licensing agreement

Be Inc., the operating system developer that's been looking for ways to move into the mainstream of computing, landed a licensing agreement with Compaq Computer that could lead to Compaq-Be Internet appliances.

The announcement marks one of the first deals to result from Be's revised strategy to target the emerging market for information appliances. Earlier this year, Be said it was working with National Semiconductor to port its software to a variety of appliance prototypes, including National's Web tablet.

One potential area of cooperation with Compaq is in Internet terminals, stripped-down PCs designed for Web surfing and e-mail delivery. At the Comdex trade show earlier this year, Compaq unveiled such a device, code-named "Clipper," which will be sold by telecommunications carriers to the public as a simplified way to get onto the Net. Microsoft has already announced plans for taking a Windows CE-enabled version of Clipper and selling it as the MSN Web Companion.

Sources at Compaq, however, have said that other communications carriers are looking at the device and considering different operating systems.

Nonetheless, just because an agreement between Compaq and Be is in place doesn't necessarily guarantee a spot at the table for the company.

"We have a licensing agreement in place if we decide to proceed with them in the future," said Hedy Baker, a spokeswoman for Compaq. "This doesn't imply or guarantee that we will use their operating system."

Be also faces a variety of competitors in this field, including Spyglass, Gateway's Amiga division, Microsoft, Liberate Technologies, Wind River Systems and numerous others. Many of these companies are also working with National Semiconductor on the Web Pad and other devices.

Still, Be executives are optimistic that its products are well suited to the marketplace.

"Since Be is a modern operating system, it can be tailored to fit the sort of devices we're talking about here," said Lamar Potts, vice president of marketing for Be. "With what we will have in the time frame it will be available, we think we're ahead of the marketplace in terms of providing all of the services [needed] for a full featured Web experience."

Be's stock, which has sat at the 6 to 14 level most of this year, shot up to 38 last week on rumors that the company would be acquired by Red Hat. Be closed up 3 today to 29.62.

Be was founded in 1990 by former Apple executive Jean-Louis Gassee as, essentially, an alternative to Apple's Mac OS. The Be system was widely touted for its multimedia capabilities but to date has not achieved widespread distribution on its originally intended destination, the desktop PC, or information appliances.

In 1996, Apple attempted to negotiate a purchase of Be, but discussions foundered over price. Apple eventually chose to purchase Next Software, which was run and part-owned by Apple cofounder Steve Jobs, for $400 million, far more than the company was offering Be.

Since then, Be has been refining its operating system for use in information appliances and landing some bundling deals with companies such as Hitachi and Microworkz.

This past February, the company offered to give its system free to computer makers on the condition that it was the first interface a consumer would see. Few takers arrived. In May, the company more seriously began discussing the Net appliance market as part of its plans to go public.

For Compaq, the arrangement provides the company with access to another software technology to use in lieu of Microsoft's Windows CE, which many industry analysts view as too costly and inefficient for use in some types of information appliances. Compaq has also experimented with the use of Linux in appliances such as TV set-top devices that can access Web-based material.

The move toward simplified information appliances will likely change how hardware companies operate. In the past, Compaq and other PC companies manufactured and marketed their products in a fairly autonomous manner. Profit was made largely from the difference between retail prices and costs.

By contrast, in the device world, the retail price is typically higher than the cost. The difference gets made up in service deals and e-commerce alliances, which means that hardware makers depend upon alliances with other companies if they hope to make a profit.

"Where the money is to be made will be the Web sites, the relationships and partnerships with the Web sites via traffic, e-commerce and revenue sharing," said Mike Larson, senior vice president and general manager of Compaq's consumer division, in an earlier interview with CNET News.com.

 

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