3Com bids goodbye to Audrey

Franklin Paul

NEW YORK: Audrey, we hardly knew ya.

After a scant six months on store shelves, Audrey, the kitchen-countertop

Internet device touted as the next generation of essential home electronics, was

unplugged by its creator, 3Com Corp.. The computer networking company said on

Wednesday it was pulling the plug on Audrey in a move to trim costs.

The $500 device led a vanguard of Web-browsing gadgets aimed at families and

users anxious to send and receive e-mail, but uneasy about buying a pricey

personal computer system, seen by some as difficult to set up and maintain.

Consumer electronics makers such as Gateway Inc., Compaq Computer Corp., and

Sony Inc., which developed similar devices, also saw the gadgets as home

messaging systems. They quickly filled the market with so-called Internet

Appliances that one executive said would "displace the old cork message

board."

Audrey came with an 8-inch (20-cm) touch screen, a '60s-style channel dial

for fast access to pre-installed Web sites, and the ability to exchange data

with two Palm or Handspring handheld computer devices.

But consumers failed to cozy up to Audrey and her cousins during the crucial

holiday shopping season in 2000, despite positive critical reaction. Santa

Clara, Calif.-based 3Com, a networking equipment pioneer that had previously

struck gold in the consumer market with the popular Palm, noticed then that

Audrey was in trouble.

"The light went on in the December/January time frame," 3Com chief

executive Bruce Claflin told Reuters. "We saw that sales were not as strong

as we wanted during the holiday buying period, and that's what signaled

it."

Audrey, 3Com said, would eat up too much time and money at 3Com, which has

reorganized operations twice in the past year as it struggles to return to

profitability. 3Com will stop marketing the device in March and will end

operations by May.

3Com earlier on Wednesday reported a $122.8 million third-quarter loss,

blaming a downturn in the telecommunications sector and decreased profit

margins, and said it had cut jobs.

"I continue to believe that in the long run there may be an attractive

segment here, but it was obvious that it was going to take longer for the

segment to develop than anticipated, and that profitability, if any, would be

distant in the future," Claflin said.

Some experts said 3Com, which spun off now-independent Palm Inc. early in

2000, set the $500 retail price tag for Audrey too high. Many full-fledged PCs

sell for less than $1,000, and other Net appliances sell for lower prices, such

as Netpliance's $299 i-opener, and CidCo's $99 MailStation.

Other said all Net appliances, which typically feature display screens that

are costly to produce, suffered from a complicated pricing quandary that

discouraged buyers.

"People weren't buying $500-$600 devices when they can go and buy a

low-end PC," said Gartner Group analyst P J McNealy. "Other people at

the low end, were discouraged by the three-year (Internet) service

contracts."

"They have all run into this problem," McNealy said. "The

Audrey problem is not unique to 3Com."

International Data Corp. analyst Bryan Ma said preliminary studies show that

overall 2000 sales of these appliances fell short of their 220,000-unit

forecast, with the total likely beneath 200,000.

"They probably had one of the more innovative and leading edge

designs," Ma said. "But it is pretty apparent that the market is

having some trouble gaining some traction."

(C) Reuters Limited 2001.