July 10, 2000 1:30 PM PDT

Netpliance customers won't get I-openers until fall

Netpliance surprised many observers last week by announcing that it was quadrupling the price for its I-opener Internet appliance.

The company today delivered an even bigger surprise: Consumers who order the newest Web-browsing unit now won't actually receive the shipment until fall.

Netpliance is already taking orders on its Web site for the new units, but will not ship those units until October. Netpliance president Kent Savage told CNET News.com that the new units should be on retail shelves by the beginning of September.

Industry watchers seemed puzzled by the gap.

"That's bizarre," said analyst Richard Doherty of the Envisioneering Group. Doherty said such a delay in shipping products is virtually unheard of.

"It's way out of the norm," he said. "There's nothing in consumer electronics or information technology that has been marketed with that kind of gap."

Analysts were already skeptical of Netpliance's new pricing model. As part of its new offering, dubbed the 2001 Netpliance membership kit, the company is adding features such as direct messaging and stock quotes, but is hiking the cost of the Web-browsing appliance from $99 to $399, on top of the $21.95 monthly Internet service fee.

The delay in shipments will no doubt raise questions about the publicly traded company's financial results for the current quarter. Because of the gap, the company will not be selling hardware for a significant period of time and will be dependent on its monthly service fees and other service revenue.

Savage said the company will still be shipping some backlogged orders for the old units this month but would not quantify the orders.

"Suffice to say that you'll see shipment revenue in July and again in September," Savage said. "We'll be filling the (retail) channels in August."

Savage had previously said that sales could take a hit in the third quarter as the company shifts its pricing, but he said it expects strong demand during the Christmas buying season.

Austin, Texas-based Netpliance has had a variety of problems to deal with since introducing the I-opener, a sleek desktop unit that lacks a hard drive but combines a keyboard, mouse and 10-inch flat-panel display. The I-opener is aimed at new computer users who want Internet access and email but aren't particularly interested in the other features a standard PC offers.

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Soon after its release, hackers found a way to add a hard drive to the machine, turning it into a fully functional PC. The company then required that consumers subscribe to its Internet service for a limited period of time to dissuade hackers, a requirement the company has dropped under the new pricing scheme.

The notice that shipments of the new units will not occur until October was not included in Netpliance's press release but can be found midway through the questions-and-answers page on the company's Web site.

"Orders placed on or after July 1 will be delivered on or after October 1," the site states.

Doherty said that the relatively minor changes the company is making to its service don't appear to account for the delay.

"It shouldn't be a big hardware change unless they've got some hidden parts-supply problem," Doherty said.

 

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