Merrill Lynch & Co figures the reason new kinds of internet appliances will take off is not simply because PCs are too expensive, it’s because they are still too difficult to use. The PC wave we are exiting is characterized by a PC on your desktop that is as powerful as yesteryear’s mainframe and almost as hard to use. It reckons the need for much simpler devices will drive the industry towards developing and building a new generation of appliances or specialty electronic devices. However, if the number of technology users is to increase from 100 million to 1 billion over the next decade or so, the as-yet largely untapped consumer market which will account for this, not corporations which are already heavy users of technology; around 80% of demand for IT is from businesses. International Data Corp estimates that the number of web users could double to 100 million this year and to 200 million by 2001. It thinks 25% of homes could be online by the end of this year-end. If it’s right, the rise of consumer- oriented appliances should therefore peg PC growth. However the PC did not replace the mainframe – which still has $17bn of annual shipments – but did capture the majority of new application development. We think the same is likely to occur to the PC as appliances surround it over time. To back its claim it uses new IDC thinking which suggests that by 2002 information appliances will outsell PCs in the consumer arena; by 2005 appliances could out-ship PCs in total. But who will lead the charge? IBM Corp resisted minicomputers and DEC messed up PCs. Now Intel and Microsoft must deal with appliances taking the low road and attacking the PC from below. Intel’s already feeling the heat from sub-$1,000 PC price points – perhaps it could swallow the highly-touted Advanced RISC Machines for this purpose, Merrill Lynch suggests. Whichever way it plays out it’s clear that appliances poised to dominate this market use MIPS, Hitachi, and ARM processors, not Intel parts. Can Windows CE can carry Microsoft into the appliance world? Merrill Lynch is skeptical and believes it’s all good news for server vendors such as IBM and HP which thrive on complexity, or cash out of chaos perhaps.
