Internet Appliance Sector Poised to Expand

3com HAS DROPPED its Audrey line of Internet access devices, and the PC seems here to stay (see “7 Reasons the PC Is Here to Stay, Page 100), but a recent report from Scottsdale, Ariz.-based Cahner’s In-Stat Group remains optimistic about the Internet appliance sector.

The report, “Internet Appliances: Escaping the PC Shadow?” claims that the market for such devices?including wired terminals, touch pads and set-top boxes?will expand by more than 40 percent each year and become a $1.3 billion business between now and 2005.

But vendors need to do at least one of two things to make the prediction a reality, says report author and In-Stat Senior Analyst Brian O’Rourke. Either hardware costs?which currently rival the prices of low-end PCs?need to drop significantly, O’Rourke states, or vendors must add additional features that differentiate the devices from traditional computers. For instance, he notes, personal TV services similar to those from TiVo or ReplayTV might be built in to set-top Internet appliances such as Microsoft’s WebTV and America Online’s AOLTV.

O’Rourke says that some vendors are also looking beyond the consumer space and into corporate vertical markets, such as health care and the hospitality industry, where portable and simple Internet access devices can offer significant benefits beyond those of more cumbersome PCs.