Smart Devices To Outsell Home PCs By 2001 - Report

NEW YORK (Reuters) - Growing popularity for devices that free users from desktop computers means that by 2001 these smart appliances will outsell consumer desktop PCs in the United States, a recent industry report shows.

Research by International Data Corp. indicates U.S. unit shipments of information appliances ranging from handheld computers and game machines to Internet-connected televisions and video telephones will outnumber those of consumer desktop personal computers by 17 percent in 2001.

With the average cost of these devices below $500, rather than the $1000-plus cost of PCs, total dollar sales of the smart gadgets are unlikely to pass that of PCs, according to the report's author, Sean Kaldor.

But with consumers wanting to get all their information from one screen and carry their computers in their pockets, Kaldor sees the appliances ripe for mass market appeal.

The hottest items in this market are Internet-smart hand- held devices like 3Com Corp.'s Palm Pilots and devices running on Microsoft Corp. (MSFT - news)'s Windows CE software, the report said. The notebook-sized devices with fold-away screens and keyboards are the most popular information appliance, representing about a third of all sales. IDC expects these hand-held devices to continue to be the most popular smart appliance in 2002.

In NetTV, the United States' TCI Group Inc., the cable unit of Tele-Communications Inc. (LBTYA - news), is looking to get into the service market, Kaldor said. European players in this field include, Cable & Wireless Plc., Canal Plus and BSkyB Corp., whose main shareholder is media magnate Rupert Murdoch's News Corp.

Dominating the market for Internet gaming devices are Japans' Sega Enterprises Ltd., Sony Corp. and Nintendo Co Ltd. These companies have such a hold on this category they leave little room for vendors like Tiger Electronics, the report said.

Kaldor raised a red flag on information appliances such as low-cost, consumer network computers that provide Internet access and applications. He said this idea has been killed by low cost PCs -- already down to $699 -- and NetTVs that cost $200 or $300.

Kaldor is also less keen on screenphones which have had initial success but face competition from NetTV. Nortel Networks and Alcatel Alsthom make phones that provide video images and voice services. Kaldor said the industry has been waiting for new phones from both companies. He said their current screenphones are expensive at around $700 or $800 each. He sees NetTvs winning this market because of their superior screen resolution, screen size and more manageable price tag.

In 1998 IDC expects a total of 5.8 million information appliances to be shipped worldwide, generating dollar sales of $2.2 billion. The Framingham, Mass. research company sees that figure rising 76 percent annually between 1998 and 2002. By 2002 shipments are expected to have risen to 55.7 million units creating annual global sales of $15 billion.

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