SEPTEMBER 15, 2000 VOL. 26 NO. 36 | SEARCH ASIAWEEK

Stuart Whitmore for Asiaweek. Ashikin says Gateway can augment its PC sales ($8.6 billion last year) by venturing "beyound-the-box".

The Cow Comes Home
Gateway has big plans for networked houses

To consumers, Gateway is the company that makes the machines that come in the cow-colored boxes. To investors, Gateway is one of many PC makers threatened by slowing sales as computing moves off the desktop to other devices such as Web TVs, cellphones and personal digital assistants (PDAs). Not a problem, says Peter Ashkin, Gateway senior vice president and chief technology officer. While remaining committed to building boxes, the company recently signed a deal with America Online aimed at putting all manner of new appliances into "digital homes." But the deal is not about hardware, Ashkin says. By partnering with AOL, Gateway hopes to sell a range of integrated network services and content through its retail outlets (39 of which are in Asia) and the Web. During a recent stopover in Hong Kong, Ashkin spoke with Asiaweek's Jim Erickson:

Is the PC dead?
Not the last time I checked. The PC is going to be joined by a lot of new companions, wired and wireless, but it definitely isn't dead. In fact most estimates project sales will continue to grow.

But to reach higher sales numbers don't they need to be made less complicated? Or are we going to see special-purpose PCs aimed at niche markets for people who like to do music on the Web or play games?
I think it is the age of specialization. Technology will permit a large number of specialized devices that do a small number of things exceedingly well. The Palm is a perfect example. Its developers chose very religiously to have a simple operating system that just did a few things well at a very attractive price point. They sold loads of them. The same thing is going to happen in other areas, be it MP3 players, advanced PDAs, or other Internet devices.

Yet Gateway is not moving as aggressively as other computer makers into the manufacture of digital appliances. Compaq, for example, is making an MP3 player.
We offer to our customers pretty much the same set of products, although not necessarily under our brand. Rather than just make these products available, we package them around training, around ease-of-use, around integration with the PC. We have a product called Musicware that is special bundles we put together that include MP3 players along with software training. We've done the same thing with a package called Photoware for digital cameras. We want people to enjoy the experience, not be frustrated by it.

How are you making the PC the center of the home network?
Gateway and AOL are working on a number of Internet appliances that are really part of a bigger initiative centered around the digital home. Our Internet strategy is about content, services and end-to-end solutions. It isn't about pieces of hardware. Gateway, through our country stores, is really the best way to get the content and services into the marketplace.

How will you make it easy to hook appliances together?
For the U.S., we've chosen HPNA [Home Phoneline Networking Association] 2.0, which allows 10-megabit-per-second transmission through ordinary phone wiring. Basically any place you have a phone jack you can plug in an appliance and it is instantly networked.

Will you be able to, say, plug in speakers and play songs from a PC in another room?
Absolutely. Or you may see more conventional consumer appliances, such as stereo receivers, have a phone jack on the back so not only will they be able to receive information from a home server, they'll be able to send music out over HPNA to speakers and other remote devices.

That's great in the U.S. There are phone jacks in every room. What about Asia?
In Asia and in Europe, wireless will be the primary choice, although it is a much more expensive solution than HPNA. Clearly everyone would have wireless if everything were equal, but now the cost is not equal.

What are the types of devices we'll be seeing later this year?
We announced earlier this year that we are developing three products with AOL. One is a counter-top device with a flat-panel screen that will sit either on a counter or under a cabinet, perhaps in the kitchen. These devices will be able to deliver Internet access in a very simple way - the goal was no manuals. As a matter of fact the goal was just one button. You don't have to worry about dialing, making connections, because everything is built in. Next year you will see a wireless version of that from us. The third version is a low-cost, CRT-based model designed for applications such as the education market.

How much will a wireless version cost?
We really haven't released the price. Remember, these are not meant to be stand-alone. They will come bundled with a service package, just like your mobile phone or cable TV. For example, we might offer a service for $2.95 a month that automatically backs up valuable data, such as digital photographs, on a remote server, without any effort on the customer's part. You can see lots of similar applications that can be delivered over the Internet seamlessly. It is services and solutions you are providing, not devices. The trick is to create services that are accessible, compelling and interesting.

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