July 6, 2000 6:05 PM PDT

Ellison signs off on latest version of network appliance

Still chasing his dream of a Microsoft-free computer, Oracle chairman Larry Ellison today released the New Internet Computer, a $199 Linux-based Internet appliance that follows through on his vision of the network computer.

The unit, sold by Oracle spinoff New Internet Computer Co. (NICC), lacks a hard drive or the Windows operating system from arch-rival Microsoft. The sleek black unit is powered by a Pentium-compatible chip from Cyrix, and its lone drive is a CD-ROM that is used to run the Linux-based operating system.

The first 10 New Internet Computers are being auctioned as individually numbered "limited editions" through Amazon.com, with a certificate of authenticity signed by Ellison. Bids are already stretching to $300, not counting a $59 shipping charge, for the auction, which does not end for more than three days.

NICC said it plans to start selling the units next week from its Web site. The company said in May that it would begin selling the unit for the education market.

The NIC costs $199 or $328 with a monitor.

Oracle originally tried to sell a network computer in 1997, but that fell flat. The idea behind both devices is the same: to put most of the computing muscle and complexity in the network, with a stripped-down terminal used to access programs and resources from the network.

Corporate buyers and consumers ignored the devices as PCs dropped drastically in price, eliminating much of the cost benefit of the NC. By early 1998, NC had already been shoved off the stage. Although it collapsed, Oracle took the software core from the NC development and created Liberate Technologies.

NICC, which uses the same logo as the old Network Computer subsidiary, hopes that its Web browsing device will prove more popular than the original "thin client," which quickly dropped off the market.

The old Network Computer subsidiary eventually went into the software business and was renamed Liberate Technologies.

"It was an idea ahead of its time," said NICC spokesman Michael Salort.

However, some analysts wonder whether the time, or the price, is right.

ARS analyst Matt Sargent said the cost is still too high for many low-income households that don't yet have a PC.

"That's going to work against these guys," Sargent said. "They really need to be in the $200 range (monitor included). If not, (consumers) will spend a few hundred dollars more and get a PC."

International Data Corp. analyst Bryan Ma shared Sargent's skepticism about the price.

"We're still talking $350," Ma said. "Is that something consumers will pay for when they could get a PC for essentially the same price?"

One advantage of the new units is they are not tied to any particular Internet service provider, unlike rivals WebTV and Netpliance. Netpliance raised eyebrows this week when it said it was raising the cost of its I-opener to $399 from $99.

NICC plans to announce a deal next week to offer free Internet service through NetZero. Consumers can also use their existing service providers if they choose.

At $199, the sales price is "very close" to the cost of making the unit, Salort said.

"We don't make any money on the hardware," he said.

Salort said NICC will aim to get revenue from sales driven through e-commerce sites and service partners.

"When you have a device priced so low, you look for creative ways to produce revenue," Salort said.

Creative Strategies analyst Tim Bajarin said the NIC faces plenty of competition, including early leader Netpliance and heavyweights Intel and Microsoft. Bajarin said he expects there will eventually be a huge market for Internet appliances, but widespread consumer adoption of the devices is probably still several years away. Who will dominate at that point is anyone's guess.

"Do Netpliance or any of the other guys have the staying power to be around?" Bajarin asked.

 

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