Microsoft unveils new MSN Companion version

REDMOND: Microsoft Corp. on Tuesday unveiled an updated version of its

low-cost personal computer service, made for novice users seeking a simple way

to surf the Internet, even as other Internet appliance makers halt production.

Version 2.0 of the MSN Companion Internet appliance service includes the

ability to add a high-speed Internet connection, and allows usage by up to nine

people in a household.

But company now sees the slimmed-down machines as a second computer in the

home that offers more family members access to such services as email. That

contrasts its initial pitch, which framed the devices as cheap, primary computer

for those wary of setting up and maintaining a desktop computer.

Microsoft is working with several PC makers, including Compaq Computer Corp.,

to design the machines, which, at less than $500, cost about half that of a full

desktop PC. Unlike a PC, they are bare-bones appliances, with no hard drive to

store data, and cannot run other software such as games or word processors.

A spokesman for Microsoft said the company pushed ahead with upgraded service

despite the recent demise of several other Internet appliances. Consumers failed

to cozy up to devices made by companies such as 3Com Corp. and Gateway Inc.

during the crucial holiday shopping season in 2000, despite positive critical

reaction, forcing some companies to take action.

3Com Corp.'s Audrey was unplugged after a scant six months on store shelves

in a move to trim costs. A similar fate fell up Netpliance Inc.'s

"i-opener" Internet appliance, one of the first Internet appliances,

after the company shifted its focus to high-speed Internet services.

MSN insists its new product is in keeping with Microsoft's attempt to make

MSN omnipresent in the home, on stationary as well as on portable devices,

giving the family the ability to share the Internet.

"It makes sense to provide these additional Internet access

points," the spokesman said. "A family can have a PC in one room and a

companion in another room, and their setting can be personalized." He said

that since the launch of MSN companion, in September 2000, sales have met

expectations, although he declined to be specific.

Separately, Compaq, said it cut its price for the Compaq iPAQ Home Internet

Appliance machine by $200, and it offers buyers six free months of the MSN

Companion service, which typically costs about $22 a month. Compaq said its IA-1

model would sell for $399, while the IA-2 is priced at $299.

Users who choose to gain access to the Internet via another provider must

still pay a $10 maintenance fee to MSN each month. Shares of Microsoft rose

$1.63 to $72.41 on Tuesday, while Compaq shares rose 14 cents to $16.07.

(C) Reuters Limited 2001.