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Netpliance Scales Back, Refocuses

Home Net appliance vendor Netpliance (Nasdaq:NPLI) announced lower-than-expected revenues for the quarter ending September 30 and a major shift in emphasis.

The company, which developed the consumer i-opener Net device, says it will stop selling the device after January 31 and, instead, will focus on providing infrastructure and managed services for devices. The company says it will continue to support existing devices.

The company also said it was reducing its payroll by 93 employees, which is 38 percent of its work force. The company said that move would help it reduce its annual operating expenses by about $5.4 million and to, over time, enable it to eliminate losses it incurred because of disappointing Net appliance sales.

Total revenue for the quarter ending September 30 was $3.8 million and total revenue for the first nine months of the year was $8 million, the company reported. The company reported a net loss for the quarter of $41.9 million, or $0.69 per share. Net loss for the first nine months of the year was $166.6 million, or $2.90 per share.

All the figures numbers were below what the company had hoped for, according to chairman and CEO John McHale. The layoffs and changes in direction will cause the company to incur a one-time restructuring charge of between $2.5 million and $3.5 million in the fourth quarter, the company says.

To accommodate the shift in direction, the company has created two new business units. The Netpliance.net will provide managed services for broadband service providers. The will develop infrastructure products for data centers, points-of-presence and residential access devices.

The company reported about i-opener 49,400 subscribers at the end of the quarter, compared to 44,000 at the end of the previous quarter. McHale noted that the industry is growing more slowly than expected.

"While the Internet appliance market is growing at a slower pace than originally anticipated, there remains tremendous growth potential in the sector," he said.

The company announced its upgraded i-opener in July but didn't ship until September. It also underwent a number of price and marketing changes, initially increasing its introductory price of $99 to $399, then reducing the price to $299.

Netpliance is the second major Net appliance-related firm in to undergo drastic changes in the last couple of weeks. Internet Appliance Network (IAN), which provided both technology and services for appliance vendors, recently announced it would focus on the technology side of the business and laid off a number of employees.

David Haskin is managing editor of internet.com's allNetDevices site.