August 28, 2000 6:35 PM PDT

Netpliance retreats on I-opener's price

Netpliance has changed its pricing strategy yet again, this time shaving $100 off the $399 price it had hoped to charge for its I-opener Internet appliance.

The Austin, Texas-based company said in early July that it was quadrupling the price of the I-opener from its $99 introductory price. Analysts questioned the competitiveness of Netpliance's device at the higher price.

The company hiked the price after a hacker found a way to turn the I-opener into a Linux-based PC earlier this year.

Today, Netpliance retreated somewhat, lowering the price for new customers and offering a $100 credit to any customer who already paid the higher price. That should be a pretty select group: Even though the company is taking orders for the new membership kit, orders already placed on its Web site are not slated to begin shipping until October. A membership kit includes the appliance and a monthly service fee of $21.95 for Internet access.

"Our...pricing strategy reaffirms our leadership and positions us as the premier information appliance, given the value-added services our membership program affords," Netpliance president Kent Savage said in a statement.

Retail sales of the I-opener 2001 membership kit, as the revamped service is known, are slated to start Sept. 1. Netpliance said today that the re-tooled appliance, which adds instant messaging and stock tracking functions, will be available at Circuit City and CompUSA.

Analyst Richard Doherty said the move puts the I-opener closer to the price range charged for the cheapest of Internet devices.

"At least they are playing in the same league as WebTV and the Microsoft Web Companions," Doherty said.

Earlier this month, Netpliance reported that its sales had increased in the second quarter but also warned that third-quarter growth could slow following its massive price increase.

Netpliance lost $40.9 million, or 68 cents per share, on revenue of $2.9 million. Analysts polled by First Call/Thomson Financial had expected a 71 cents-per-share loss.

The company had more than 44,000 subscribers at the close of the second quarter, up from 21,000 at the end of the first quarter. Despite the increase, chief executive John McHale said he expected subscriber growth to slow in the third quarter because of the price hike.

 

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