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RealTime IT News

Netpliance Laces Up the Gloves


Dear Kelly:

Well, it should not surprise you that I disagree with many of the statements and most of the assumptions that you make in your article about the company. I think your reference to the company as a "cockroach" clearly states how you feel, and hints to your objectivity.

However, my primary concern is of a more general nature. You evaluate an IA [Internet appliance] based on PC criteria. To compare the two is, I think, confusing for consumers and therefore does them a disservice. To be more specific, if an IA were judged on speeds and feeds, price and bytes then Netpliance would not have almost 50,000 loyal customers (remember, we do not tie customers to any kind of contract). In addition, customers have a full month to decide on whether or not they wish to use the product. Just something to consider.

The fact is, if price for IAs was as much of an issue as you position it to be, how do you explain why free computers did not fly off the shelves. If the answer is simply because of too much banner advertising, then wouldn't someone of figured out a way around that little problem? There is a huge consumer demand for simplicity and convenience to become a part of the consumer experience for those less technologically adept than you. In fact, the same benefits the computing industry enjoyed when windows replaced DOS may spur a wider acceptance of computing and the Internet. But this is the frontier of computing, and where PC makers are tweaking products we are constantly innovating and improving. It is a learning process, but I hope you will agree it is a worthy one.

You appear not to like Netpliance, and I have little hope of persuading you otherwise. However, if you are interested in developing a better understanding of the company, or just information appliances in general, I welcome the opportunity to opening a dialogue between us. (In response to: "Netpliance Unveils a Real i-opener")

Respectfully,
Jon Osmundsen
Corporate Communications Director

Dear Jon,

While I can appreciate your position as chief pom-pon shaker, I respectfully disagree with your fundamental arguments. Rather than speak in generalities, I'll take issue with the meat and potatoes of Netpliance's current outlook, which I've consistently believed to be dim, long before the Internet appliance maker even hit the new issues market earlier this year with its bloated $150 million offering.

For the quarter ended June 30, 2000, Netpliance burned through $22 million in marketing expenses primarily attributable to an increase in advertising costs. During that same period, Netpliance doubled its user base from 22,000 to 44,000. That boils down to a customer acquisition cost of about $1000 a head. That's not an impressive box score if you're selling stripped down Net appliances at $99 a pop.

Bottom line - with a marketing budget of $22 million, I'm certain I could sell a subsidized punch bowl full of Sea Monkeys to curiosity seekers. Despite spendthrift customer acquisition costs and a deeply discounted i-opener, the very idea that Netpliance only managed to add a paltry 22,000 customers during that period should be more than enough handwriting on the wall for skeptics. But, it gets much worse.

Netpliance was already facing an uphill struggle, even as it offered its i-opener appliance at blowout prices as an incentive for new customers and unsuspecting investors alike to drink the special Kool-Aid. Then in early July, the company bumped the price on its marginally popular i-opener from $99 to nearly $400. Netpliance's top banana